ECONOMIC  ASPECTS 
T-  OF  THE  NK^AR  '-T- 


S  EDWIN    J.   CLAPP 


Columbia  ^Binibersitp 

mttfECitpofiaetogorfa 


LIBRARY 


GIVEN   HY 


ECONOMIC   ASPECTS    OF   THE    WAR 


By  EDWIN  J.   CLAPP 


THE   PORT  OF   HAMBURG 

(Second  Printing)  12mo,  Cloth  Binding, 

Gilt  Top,  220  pages,  19  Illustrations 

Price  $1.50  Net 


THE  PORT   OF   BOSTON 
(In  Preparation) 


ECONOMIC    ASPECTS 
OF  THE  WAR 


NEUTRAL  RIGHTS,  BELLIGERENT  CLAIMS 

AND  AMERICAN  COMMERCE  IN 

THE  YEARS   1914-1915 


By 
EDWIN    J.    CLAPP 

Professor  of  Economics,  Neto  York  University 


New  Haven:  Yale  University  Press 

London:   Humphrey  Milford 

Oxford  University  Press 

MDCCCCXV 


/ 


"t^ 


^ 


Copyright,  August,  1915 
By  Yale  University  Press 

First  printed  August,  1915,  12,500  copies 


940-3  1 


^ 


PREFACE 

This  story  of  international  lawlessness  in  the  first 
year  of  the  Great  War  is  the  outgrowth  of  a  public 
lecture  given  at  New  York  University  in  March, 
1915. 

The  book  was  written  because  it  seemed  to  me  that 
we  Americans  were  paj'ing  too  much  attention  to  the 
affairs  of  belligerents  and  too  little  to  our  own. 

After  all,  we  are  by  no  means  untouched  by  the 
war.  It  imperils  not  only  our  present  material  inter- 
ests but  also  neutral  rights  upon  which  the  material 
interests  of  all  peaceful  nations  in  the  future  depend. 

The  neutral  world  is  watching  for  us  to  realize 
and  assert  its  rights  and  ours.  Hence  this  statement 
of  what  those  rights  are  and  this  record  of  what 
seems  to  have  occurred  to  threaten  them. 

Edwin  J.  Clapp. 
University  Heights, 
New  York, 
August,  1915. 


CONTENTS 


Chap.  I.     Rights  of  Nefthals  under  Intern^ational 
Law       ....... 

Elements  of  the  present  situation. 
Nature   of  international  law 
Its  sanctions 

The  necessity  for  a  compulsion 
War  and  neutrals.     Meaning  of  "^ 
Contents   of  international  law 

Declaration  of  London 
Violations  of  international  law. 
Mine   laying 

"Modifications"  of  Declaration  of  London 
Orders   in   Council 
Changes  in  contraband  list 
Blockade 
Need  of  return  to  legal  limits  now 


1-18 


A 

2 

3 

'economic  war" 

4 

. 

6 

. 

7 

8 

f  London    . 

9 

. 

11 

. 

13 

. 

15 

. 

16 

Chap.  II.     The    August   Order   in    Council   and   its 
Effect  on   the   Export  of  Foodstuffs 

Our  right  to  ship  food  to  Germany 

Especially  as  defined  in  Declaration  of  London   . 
Britain's  abolition  of  that  right. 

The  August  20  modification  of  the  Declaration  of 
London  ..... 

EflFect  on  direct  trade  with  Germany 
Effect  on  indirect  trade  with  Germany 
Other  measures. 

Pressure  on  steamship  lines 
Re-export  embargoes  of  neutrals 
Netherlands  Oversea  Trust 
Movement  of  foodstuffs  markets. 

Grain  ....... 

Flour  

Our  loss  not  of  money  but  of  principle     . 


19-36 

19 
21 


22 
23 
24 

27 
28 
29 

32 
34 
36 


Vlll 


CONTENTS 


Chap.  III.     Foodstuffs    under    International    Law 
The  October  Order  in  Council  . 

Our  proclamation  of  our  rights,  August  15 

Precedents  in  international  practice,  especially  Eng 
land's  ..... 

The  October  Order  in  Council  .... 
Retention  of  harsh  features  of  August  Order 
Forbidding  shipments  "to  order"  ... 
Effect  on  strictly  neutral  trade 

Operation  of  October  Order. 

Case  of  the  four  meat  steamers  . 

Compelling  neutrals  to  place  re-export  embargoes 

Trade  discouragement  through  detention  policy 

Our  protest  December  26  .... 

British   answer  January   7        .  .  .  . 

Intimation  of  complete  ban  on  our  exports  . 

Chap.  IV.     The  Wilhelmina.     A  Test  Case     . 

Origin  and  method  of  the  shipment 

Reception  by  British  public 
British  measures  to  stop  the  cargo. 
The  excuse. 

German  confiscation  of  grain  and  flour   . 
The  action. 

Grain  and  flour  declared  contraband 
Wilhelmina    seized      ..... 
Disposal  of  Wilhelmina  case. 

Our  note  of  February  15  and  its  answer 
Prize  court  proceedings         .... 
New  Order  in  Council       .... 
Our  objection  to  the  handsome  settlement  . 


37-58 
37 

39 
44 
45 

47 
48 

49 
51 
53 
53 
54 
57 


59- 


59 
60 


61 

64 
66 

67 

72 
72 
74 


Chap.  V.     The  Blockade 76-92 

Its  alleged  cause:  the  German  War  Zone  Decree       .  76 

That   Decree 77 

Our  protest  and  Germany's  answer       ...  77 

Our  attempt  to  reconcile  England  and  Germany     .  80 

Answers  of  the  belligerents  .....  80 


CONTENTS 


IX 


The  Blockade. 

Its   announcement 
Our  protest  of  March  5 
Britain's  answer  of  March  15 
Our  protest  of  March  30 
British  answer  of  July  23   . 


83 
84 
85 
87 
89 


Chap.  VI.     Some  Effects  and  Aspects  of  the  Block- 
ade       .  .  .  •  • 

Effect  of  the  March  23  Order  in  Council  . 

The  meat  seizures 

April  13  prize  court  proceeding  . 
May  21  statement  of  Foreign  Office 

Statement  of  packers 
Negotiations  between  packers  and  British 
"Caveat"  note  of  July  15       .  .  • 

British  answer       .  .  .  •  • 

British  control  over  provisions   for  neutrals 
The  solution. 

Blockade  the  key  to  our  difficulties 
The  dangerous  precedent  created  . 
The   question   of  our   neutrality    . 
Declared  stand  of  two  members  of  British  Cabinet 

Chap.  VII.     Starting  the  Cotton  :Movemext  . 

Introductory. 

Importance  of  cotton  exports  for  the  South  . 
Situation  in  fall  of  1914       .... 
The  movement  to  England. 
Delay  in  ships  and  financing 
Light  movement  in  early  months  . 
The  movement  to  Germany. 

Preponderance  of  indirect  shipments    . 

The  drop  in  cotton  prices,  because  of  slack  German 

movement      .  .  .  • 

Difficulties  of  exporting. 
To  Germany  direct. 

Vessels  of  other  neutrals 


93-111 

93 
94 
94 
95 

97 

93 

99 

100 

101 

103 
105 
107 

108 


112-139 


112 
113 

115 
116 

116 

118 

120 


CONTENTS 


Existing   American   vessels      . 

Insurance. 
Acquired  American  vessels     . 
Dacia  ..... 

Shi})  purcliase  bill 
To  Germany  indirect. 

Export  embargoes  of  adjacent  neutrals 
Contraband  rumors 
Solution  of  the  difficulty  in  German  exports, 
False  measures  .... 

The  measure   that   worked 

British  non-contraband  declaration 
Taking  the  credit  .... 


122 

124 
125 
127 

131 
133 

13G 
136 
137 
138 


Chap.  YIII.     Stopping  the  Cotton  Movement  . 


.    140-168 


Remaining  hindrances,  even  after  British  declaration 

More  export  embargoes 

X-raying  cotton  bales   .... 

North  Sea  declared  a  war  zone  (mined) 
British  purchases  at  low  prices 
Good  effect  of  German  takings  on  market 
Preparation   by   England  to  stop  the  movement  to 
Germany. 

Contraband  talk 

German  War  Zone  declaration 

British  retaliation  planned   . 
The  blockade 

Its  March  modification 

Effect  of  Order  on  neutral  trade 
Effect  of  blockade  on  cotton  prices 
Inefficacy    of    blockade    measures,    regarding    Ger- 
many. 

Effect  on  ammunition  makers       .  .  .  . 

Effect  on  industries       ...... 

Ill  effects  of  blockade  on  the  South. 


Past 


Future 
The  solution 


140 
141 
141 
144 
147 


147 
149 
150 
152 
152 
155 
161 


161 
163 

165 
165 
166 


CONTENTS 


XI 


Chap.  IX.     Copper  as  Lawful  Commerce   . 
Introduction. 

Importance  of  the  export  field  for  our  copper 
Reduction  in  output  at  outbreak  of  war 
Large  takings  of  England       .... 
Difficulties  of  shipping  to  Germany. 

Copper  under  the  Declaration  of  London 
Necessity  of  shipping  via  neutrals. 

Nothing  in  August    ..... 
Via  Holland  in  September 

Seizures  by  England       .... 
Copper  made  conditional  contraband  . 
Violations  of  law  by  those  seizures. 
Declaration   of   London 
"Continuous  voyage"  cases 
August  20  Order  in  Council 

Via    Italy    and    Scandinavia    in    October    and 
November      ..... 
Seizing  the  copper  .... 

Copper  made  absolute  contraband  . 
The  propriety  of  ranking  copper  as  contraband. 
Its  immunity  under  Declaration  of  London  . 
Great  Britain's  previous  position  . 
Effect  on  copper  industry   .... 

Chap.  X.     Copper  as  Coxtraband  of  War 
Long  delays  of  detained  neutral  cargoes  . 

Sir  William  Scott  thereon    .... 
The  November  British  proposal  to  direct  the  copper 
trade  ..... 

Gardner's  visit  and  its  failure 
Confining  neutrals  to  their  average  annual  quotas 
Italy's  need  for  more  copper  than  usual 

England's    own    example    .... 
Forbidding  neutral  shipments  "to  order" 
Our  December  note  of  protest  .... 
Answer  from  England,  on  January  7  and  February 

10 

Final  surrender  of  copper  trade  to  Admiralty 
Italy's  copper  famine   ..... 


169-18T 

169 
170 

17;3 

172 

173 
173 
174 
175 

175 
176 

180 

181 
182 
182 

183 
183 
186 

188-208 

189 
190 

192 
193 
194 
194 
195 
197 
200 

201 

202 


xii                              CONTENTS 

Advantage  enjoyed  by  British  dealers  . 

204 

American  producers  sign  the  Agreement 

205 

Efficacy  of  the  "economic  pressure"  as  regards  cop 

per           206 

Effect  on  Germany 

206 

Effect  on  United  States       .... 

208 

Chap.  XI.     The  Export  Situation     . 

.  209-220 

Growing  balance  of  trade          .... 

210 

Its  direction 

210 

Items  of  large  growth  in  exports     . 

212 

The  Seven  Groups 

217 

Decrease  in  other  exports     .... 

217 

"Spotty"  export  situation          .... 

218 

Chap.  XII.     The  Import  Situation   . 

.  221-238 

England's  use  of  her  economic  power 

221 

The  commodities   affected          .... 

224 

Rubber           .' 

225 

Wool              

234 

Tin 

238 

Chap.  XIII.    The  Import  Situation   (Continued 

)    .   239-253 

Potash 

239 

Use.     Present  status     ..... 

239 

Dyestuffs 

244 

Our  dependence  on  Germany 

245 

Other  imports            ...... 

252 

Prospective  loss  of  Federal  revenue 

261 

Chap.  XIV.     The    Practicability   of   Starving   Ger- 
many    264-290 

Foodstuffs 265 

The   fallacy 265 

Why  it  arises 267 

Germany's  former  measures  to  remain  self-support- 
ing. 

Tariff  protection 270 

Intensive  agriculture           .....  271 

Resulting  independent  food  supply  .         .         .  272 


CONTENTS 

xiii 

Germany's  present  measures   .... 

273 

Confiscation  of  grain  and  flour  . 

274 

Bread  tickets 

275 

Treatment  of  live  stock  and  fodder  problems   .           276 

The   new   harvest        ..... 

279 

The  smuggling   trade       ..... 

281 

Fertilizer 

284 

Oil 

286 

Possibility     of     permanent     substitution     for 

our 

products 

287 

England's  trust  in  the  "attrition  policy"  . 

290 

Our  need  to  resume  trade  with  Germany  . 

290 

Chap.  XV.     War  Orders  and  the  Power  They  Place 

IX  Our  Hand       .... 

.  291-309 

Importance  of  artillery  in  this  war  . 

291 

Large  orders  placed  in  America 

292 

Official  approval  of  State  Department     . 

294 

German  complaints  of  these  exports 

294 

Bernstorff  on  aeroplanes       .... 

296 

German  note  of  February   16        . 

298 

Bernstorff's  ammunition  memorandum  . 

298 

Our  right  to  ship  arms   ..... 

301 

Germany's  policy  in  the  past 

301 

Our  obligations  under  neutrality  laws  . 

301 

The  argument  on  humane  grounds 

302 

Our  material  advantage  from  the  orders 

305 

Our  right  to  cease  these  arms  exports. 

Hague  Convention  supporting  it  . 

306 

The  use  of  such  action: 

To  compel  return  to  the  limits  of  law 

307 

APPENDIX 

President  Wilson's  Neutrality  Appeal  . 

.       311 

British  Orders  in  Council. 

Order  of  August  20          .... 

.       312 

Order  of  October  29         ...         . 

.       313 

Order  of  March  11 

.       314 

Order  of  March  23 

.       316 

xiv  CONTENTS 

American  note  presented  jointly  to  the  belligerents  in 
February,  suggesting  modifications  of  tlie  sever- 
ity of  war  at  sea       ......       316 

Letter  of  Jefferson  to  Pinckney  in  1793  .  .  .  .       318 

Minority  Report  of  the  Committee  on  Merchant  Marine 

of  the  United  States  Chamber  of  Commerce       .       321 

Declaration  which  American  Associate  Members  of  Liver- 
pool Cotton  Exchange  were  asked  to  sign  .  .       332 

British     detentions     of    American     Copper    exports     to 

neutrals,  autunm,  1915        .....       323 

Copper    agreement    of    United    States    producers    with 

British    Admiralty 324 

Statement  issued  by  British  Embassy  in  Washington  in 

May,  telling  American  exporters  how  to  operate      325 

Circular  letter  from  United  States  Trade  Advisers  sent 

to  American  importers 327 


ECONOMIC   ASPECTS   OF   THE   WAR 


CHAPTER  I 

Rights  of  Neuteals  under  International  Law 

Before  this  war  had  been  long  m  progress  most  of 
us  learned  for  the  first  time  the  real  nature  of  inter- 
national law.  The  word  "law"  had  tricked  us  into 
thinking  of  something  clearly  defined  and  accepted 
by  those  to  whom  it  applied,  and  something  backed 
by  force  to  compel  obedience. 

Now  we  learn  that  what  we  considered  inter- 
national law  consists  mainly  of  a  great  body  of 
precedents  of  different  nations,  some  of  them  conflict- 
ing. These  precedents  represent  certain  immunities 
granted  by  belligerents  to  the  commerce  of  neutrals 
in  time  of  war.  To  be  sure,  the  immunities  are  an 
advance  over  the  days  when  a  belligerent  proceeded 
like  a  pirate  against  lives  and  property  on  ships: 
trading  with  the  enemy.  But  the  advance,  when  we 
consider  it  closely,  is  seen  in  no  way  to  have  kept 
pace  with  the  growth  of  the  vast  interests  it  was 
designed  to  protect.  International  law  at  the  best 
is  an  inadequate  recognition  of  the  rights  of  those 
who  keep  the  peace  at  the  hands  of  those  who  break 
it. 

Yet  even  such  law  as  there  was  has  been  dis- 
regarded. Blinded  by  self-interest,  the  belligerents 
have  inaugurated  a  return  to  the  practices  of  piracy 


2       ECONOMIC  ASPECTS  OF  THE  WAR 

from  which  this  law  has  been  designed  to  save  us. 
When  we  turn  to  a  power  sufficient  to  compel  obedi- 
ence to  the  law,  we  find  that  behind  it  there  is  nothing 
but  international  morality,  the  public  opinion  of  the 
world. 

Especially  in  the  last  fifteen  years  this  public 
opinion  has  been  enlightened  as  to  the  great  interests 
dependent  upon  an  uninterrupted  flow  of  peaceful 
commerce  in  war  times.  True,  in  the  process  of  pub- 
lic enlightenment  there  has  been  more  emphasis  upon 
the  horrors  of  war  in  general.  The  strongest  of 
the  forces  forming  public  opinion  on  international 
matters  has  been  the  peace  movement.  Today  we  can 
say  that  more  good  might  have  been  accomplished  if 
the  greater  emphasis  had  been  not  upon  preventing 
all  war  but  upon  confining  its  damage  to  those  who 
fight.  But  a  valuable  by-product  of  the  peace  move- 
ment has  been  the  spread  of  information  on  the  rights 
of  peaceful  nations  compared  with  belligerents  and 
the  need  to  extend  those  rights,  not  restrict  them. 

It  was  hoped  that  in  time  of  war  this  international 
public  opinion  as  to  the  rights  of  neutrals  would 
exercise  a  strong  moral  force  upon  the  belligerents 
to  stay  within  the  limits  of  law.  That  is,  it  was  ex- 
pected that  the  conscience  of  belligerents,  fearing  the 
disapproval  of  neutrals,  would  compel  respect  for 
the  established  order  of  things. 

We  were  doomed  to  disappointment.  The  dis- 
approval of  neutrals  has  not  been  lacking,  expressed 
most  clearly  in  the  protests  of  their  governments 
directed  to  both  belligerents.     But  a  belligerent  con- 


RIGHTS  OF  NEUTRALS  3 

science,  that  is,  fear  of  this  disapproval  or  even  any 
large  respect  for  it,  is  lacking  in  the  parties  to  the 
war. 

Perhaps  it  was  too  much  to  expect  that  inter- 
national morality  alone  would  suffice  to  give  sanction 
to  international  law.  Within  national  boundaries  we 
do  not  trust  to  morality  alone.  The  prime  interests 
of  life  and  property  are  safeguarded  by  definite, 
clearly  understood  laws,  accepted  by  all,  and  backed 
by  force.  Morality  supplements  force  and  does  not 
supplant  it.  Withdraw  the  force  of  the  law  in  any 
nation  and  its  observance  would  disappear.  Could 
we  expect  international  morality  alone  to  be  any 
more  able  to  supplant  force  in  compelling  observance 
of  international  law? 

Whatever  our  expectations  were,  regarding  the 
binding  force  of  morality  upon  warring  nations,  we 
can  have  them  no  more.  It  is  necessary  to  find  some 
form  of  peaceable  compulsion  that  will  bring  the  bel- 
ligerents back  to  the  limits  of  law.  Everyone  recog- 
nizes the  necessity  of  doing  this  at  the  end  of  the  war. 
As  a  sequel  to  the  peace,  men  are  planning  a  new  sort 
of  international  law  with  sharp  power  to  enforce  it. 
But  the  return  to  legal  limits  must  be  now,  in  the 
midst  of  the  war.  For  neutrals  to  forfeit  their  rights 
will  be  a  victory  for  the  forces  of  international  im- 
morality and  disorder.  Respect  for  international 
law  will  be  permanently  weakened. 

Moreover,  no  one  can  with  certainty  say  that  the 
end  of  the  war  will  see  established  the  formal  system 
of  international  law  of  which  we  dream.     It  may  be 


4       ECONOMIC  ASPECTS  OF  THE  WAR 

that  this  law  will  still  be  largely  a  matter  of  prece- 
dents, enforced  by  nothing  stronger  than  the  moral- 
ity of  nations.  What  security  will  there  be  in  our 
relations  if  those  precedents,  hard  won  in  the  past, 
are  now  effaced  and  if  that  international  morality 
notoriously  proves  unequal  to  its  task? 

Apart  from  this  matter  of  principle,  the  great 
interests  of  trading  nations,  injured  by  the  actions 
of  belligerents,  and  the  constant  peril  to  innocent 
lives  upon  the  high  seas,  both  call  for  a  return  to 
freedom  of  neutral  trade  and  travel  now,  before  the 
end  of  the  war,  whose  end  we  cannot  foresee.  Now 
is  the  time  to  put  an  end  to  the  sacrifices  of  life  and 
property  demanded  of  those  who  choose  to  remain 
aloof  from  the  conflict. 

.  From  the  very  beginning  this  war  went  beyond 
the  limit  of  military  and  naval  actions.  It  became 
an  "economic  war" ;  namely,  a  process  of  interrupt- 
ing the  flow  of  commerce  between  neutrals  and  bellig- 
erents and  even  between  neutrals  themselves.  The 
purpose  was  to  deprive  the  interrupted  belHgerent  of 
necessities  of  military,  industrial  and  civil  life  and 
so  bring  upon  the  enemy  nation  "pressure"  sufficient 
to  end  the  war. 

But  an  economic  war  of  this  sort  is  also  an  eco- 
nomic war  against  neutrals,  for  the  same  pressure 
is  brought  to  bear  upon  them  as  upon  the  belligerent 
attacked,  perhaps  even  greater  pressure.  It  may  be 
that  the  belligerent  can  find  or  develop  a  substitute 
for  the  neutral's  product  more  easily  than  the  neutral 
can  find   a   substitute   for   the  belligerent's   market. 


RIGHTS  OF  NEUTRALS  5 

There  are  two  parties  to  all  trade.  It  is  impossible 
to  interrupt  the  trade  without  striking  them  both. 

The  economic  war  began  in  August,  1914.  Soon 
after  the  outbreak  of  the  military  war  England's  sea 
power  drove  German  naval  vessels  from  the  ocean. 
Since  then,  Germany's  navy  upon  the  high  seas  has 
been  unable  to  do  more  than  carry  on  a  sort  of 
guerrilla  warfare  beneath  the  waves.  England,  after 
driving  German  cruisers  from  the  Atlantic,  proceeded 
to  inaugurate  measures  designed  to  withhold  from 
Germany  the  importation  of  most  commodities  that 
come  to  her  by  sea.  Germany  retaliated  by  a  sub- 
marine campaign  that  endangered  not  only  neutral 
property  but  also  neutral  lives  on  vessels  sailing  to  or 
from  England. 

Through  this  policy  of  action,  retaliation  and 
counter-retaliation  the  seas  have  become  a  battlefield 
where  the  commerce  and  citizens  of  neutral  countries 
venture  at  peril  of  capture  or  sudden  destruction. 

This  book,  dealing  with  the  effect  of  belligerent 
violations  of  neutral  trade  rights  upon  the  agricul- 
ture, industries  and  commerce  of  the  United  States, 
could  be  written  about  any  nation  now  at  peace. 
Our  wrongs  and  losses  are  merely  types  of  what  has 
been  forced  on  other  neutrals  as  well.  The  sum  of 
these  wrongs  and  losses  is  an  argument  demanding 
that  nations  which  plan  to  work  and  trade  be  led  to 
dismiss  now,  and  for  all  time,  the  aggressions  of  those 
that  plan  to  devastate  and  slay. 

It  happens  that  the  United  States  is  the  only  great 
power  remaining  neutral,  the  only  force  today  that  is 


6       ECONOMIC  ASPECTS  OF  THE  WAR 

able  to  assert  tlie  riglits  of  the  world  of  peace.  If  we 
fail  in  the  objects  we  seek,  in  the  negotiations  we 
carry  on  with  both  belligerents,  the  hope  of  all 
neutral  nations  is  gone. 

It  is  worth  while  briefly  to  review  that  body  of 
neutral  riglits  which  we  called  international  law  and 
the  successive  measures  by  which  those  rights  were 
abolished. 

By  common  consent  the  seas  are  the  public  high- 
ways of  nations ;  outside  a  zone  three  miles  from 
shore  they  are  not  the  domain  of  any  one  nation. 
They  belong  to  peaceful  commerce,  not  to  belliger- 
ents who  roam  their  surface  seeking  to  destroy  each 
other.  As  a  remnant  of  marine  barbarism,  a  bellig- 
erent has  the  right,  if  it  has  the  power,  to  capture 
or  drive  from  the  ocean  the  merchant  vessels  of  its 
foe.  To  the  extent  of  its  command  over  the  sea,  a 
belligerent  may  prevent  contraband  of  war  from 
reaching  an  enemy  in  any  vessels ;  and,  if  capable  of 
blockading  the  enemy's  seacoast,  may  put  a  stop  to 
all  ocean  commerce  of  the  blockaded  country.  Under 
international  law,  these  were  the  limits  and  conditions 
of  interfering  with  commerce  between  neutrals  and  a 
country  at  war. 

Only  within  much  narrower  limits,  according  to 
modern  conceptions  of  international  law,  can  a 
belligerent  interfere  w^ith  commerce  between  neutrals 
themselves.  This  commerce  may  be  interrupted  only 
when  it  consists  of  contraband  of  war — the  actual 
tools  of  fighting — demonstrably  in  transit  to  enemy 
territory. 


RIGHTS  OF  NEUTRALS  7 

These  are  the  rights  of  commerce  on  the  seas.  The 
rights  of  travel  are  as  well  understood.  Though  a 
belligerent  may  capture  and  in  certain  cases  destroy 
a  merchant  vessel  of  the  enemy,  this  may  not  be  done 
without  providing  for  the  safety  of  crew  and  pas- 
sengers. All  passengers  on  neutral  vessels,  wherever 
bound,  are  immune  from  interference,  excepting  mem- 
bers of  the  armed  forces  of  the  enemy  traveling  home. 

The  laying  of  mines  at  sea  is  not  permitted  except 
for  defensive  purposes  and  then  only  in  the  terri- 
torial waters  of  the  warring  power  that  lays  them. 

With  these  main  exceptions,  which  are  burdensome 
enough,  the  sea  must  be  free  for  the  uses  of  commerce. 

While  this  is  international  law  as  generally  under- 
stood, it  has  not  been  in  form  to  give  nations  a  sense 
of  security.  The  law  is  mainly  in  the  form  of  prece- 
dents, such  as  proclamations  of  belligerents  in  pre- 
vious wars,  decisions  of  the  prize  courts  of  captors, 
and  treaties  between  individual  nations.  Some  of 
the  precedents  of  different  countries  are  conflicting. 
Therefore  civilized  powers  have  made  several  at- 
tempts to  reduce  the  law  of  the  sea  to  a  form  accept- 
able to  all  and  accepted  by  all. 

One  such  attempt  resulted  in  the  brief  Declaration 
of  Paris,  adopted  as  a  sequel  to  the  peace  negotia- 
tions following  the  Crimean  War.  More  recently  in 
the  Hague  Conferences  efforts  were  made  to  form 
treaties  which  all  nations  were  to  sign.  Most  impor- 
tant for  our  present  purposes  is  the  Declaration  of 
London.  The  British  Government  in  1909  called  the 
London  Conference  to  codify  the  law  of  the  sea.   All 


8        ECONOMIC  ASPECTS  OF  THE  WAR 

the  leading  nations  took  part.  The  result  was  the 
Declaration  of  London,  signed  by  all  national  repre- 
sentatives who  attended  the  Conference. 

It  is  true  that  not  all  the  Hague  Conference 
agreements,  called  Conventions,  were  accepted  by  all 
civilized  nations.  It  is  true  that  for  reasons  partly 
selfish  and  partly  technical  the  Declaration  of  London 
was  not  ratified  by  many  home  governments  and  so 
did  not  become  officially  binding  upon  them.  But  it 
was  signed  by  the  representatives  of  all  great  powers. 
The  Preliminary  Provision  reads : 

"The  Signatory  Powers  are  agreed  that  the  rules 
contained  in  the  following  Chapters  correspond  in 
substance  with  the  generally  recognized  principles  of 
international  law." 

Hence  it  is  that  neutrals  felt  that  the  Declaration 
of  London  was  morally  binding.  Hence  it  is  that 
nations  at  peace  looked  forward  to  seeing  the  judg- 
ment of  civilized  nations  as  to  the  rights  of  neutrals 
upon  the  sea,  expressed  particularly  in  the  Declara- 
tion of  London,  proclaimed  as  sea  law  by  all  belliger- 
ents at  the  outbreak  of  the  war.  We  were  dis- 
appointed. 

The  disregarding  of  legal  limits  was  first  in  evi- 
dence when  either  Germany  or  England  began  laying 
floating  mines  upon  the  high  seas,  forbidden  in  a 
Hague  Convention.  Each  took  the  alleged  action  of 
the  other  as  the  excuse  for  retaliation.  Because  of 
these  floating  mines  in  the  North  Sea,  literally  scores 
of  vessels  were  lost,  mostly  belonging  to  the  Scandi- 


RIGHTS  OF  NEUTRALS  9 

navian  countries  or  Holland.  Three  American  ves- 
sels were  included,  the  Greenbriar,  Carib  and  Evelyn. 
Because  of  the  danger  of  mines,  ocean  freights  and 
war  risk  insurance  rates  became  a  heavy  burden  on 
shippers  and  buj^ers  and,  in  the  case  of  some  com- 
modities, became  prohibitive  of  commerce.  A  pall  of 
uncertainty  and  fear  was  thrown  over  the  commercial 
world. 

Unfortunately,  as  it  would  seem  in  the  light  of 
later  events,  America  refused  to  join  the  North  Sea 
neutral  countries  in  a  protest  against  the  mining  of 
the  North  Sea.  Such  action  might  have  made  more 
effective  the  protest  of  all  neutrals  against  the  later 
German  War  Zone  about  the  British  Isles. 

Yet;  the  effect  of  mines  upon  the  high  seas  was 
small  compared  with  the  paralysis  of  trade  effected 
by  a  practical  abolition  of  the  rights  of  neutrals  to 
trade  with  Germany  and  a  severe  restriction  of  their 
right  to  trade  with  each  other.  England  brought  this 
about  by  certain  amendments  to  international  law 
through  its  Orders  in  Council.  Germany,  with  her 
retaliatory  submarine  warfare,  designed  the  same 
paralysis  of  English  trade.  That  the  object  was  not 
attained  is  due  solely  to  the  fact  that  German  sub- 
marines are  less  omnipresent  and  less  able  to  intercept 
all  trade  than  British  cruisers  are. 

The  exact  process  of  this  abolition  of  the  freedom 
of  commerce  is  easy  to  follow. 

At  the  very  opening  of  the  war  the  American 
Secretary  of  State,  with  a  view  to  protecting  neutral 
rights  while  allowing  the  belligerents  all  lawful  free- 


10     ECONOMIC  ASPECTS  OF  THE  WAR 

dom  of  action,  suggested  to  them  that  they  adopt 
diirinn;  this  conflict  the  unratified  Dcchiration  of 
London  as  their  code  of  action  towards  neutrals. 
Germany  and  Austria  agreed.  Russia  and  France 
delayed  their  answer  until  they  could  hear  from 
Great  Britain,  and  then  joined  that  country  in  its 
policy  announced  by  the  Order  in  Council  of  August 
20,  1914,  accepting  the  Declaration  of  London  with 
modifications. 

The  modifications  were  subversive  of  the  principles 
of  the  Declaration  to  which  they  were  attached. 
These  modifications,  supplemented  by  an  unexampled 
extension  of  the  British  contraband  list,  and  finally 
by  what  our  government  calls  an  illegal  blockade, 
have  been  England's  method  of  exercising  economic 
pressure  upon  Germany  and,  necessarily,  upon  all 
neutral  nations  that  trade  w^th  her. 

In  the  Declaration  of  London  the  articles  classed 
as  absolute  contraband  of  w^ar — that  is,  articles  which 
Great  Britain  might  properly  shut  out  of  Germany 
altogether — were  restricted  to  the  actual  tools  and 
equipment  of  fighting  nations.  Conditional  contra- 
hand  was  a  more  comprehensive  list,  including  such 
merchandise  as  food,  clothing,  coal,  harness  and 
saddlery,  horseshoes  and  barbed  wire.  These  articles, 
capable  of  direct  use  by  the  armed  forces  of  the 
enemy,  might  be  stopped  only  if  the  interfering  bel- 
ligerent could  prove  that  they  were  destined  for  those 
forces.  Finally,  the  Declaration  specified  a  list  of 
free  goods,  articles  which  might  not  be  molested  be- 
cause only  distantly  related  to  warfare,  necessary 


RIGHTS  OF  NEUTRALS  11 

to  the  civilian  population,  and  contributing  a  very 
important  portion  of  the  commerce  of  peaceful 
neutrals.  Such  articles  were  cotton,  wool,  hides  and 
skins,  and  rubber. 

This  was  law  as  codified  in  the  Declaration  of 
London.  The  British  Order  in  Council  of  August 
20  had  the  efFect  of  adding  the  conditional  contra- 
band list  (food,  clothing,  etc.)  to  the  absolute  list, 
by  decreeing  that  conditional  contraband  would  be 
presumed  to  be  moving  to  the  German  military,  and 
hence  subject  to  capture,  if  the  goods  were  "con- 
signed to  or  for  an  agent  of  the  enemy  state  or  to  or 
for  a  merchant  or  other  person  under  control  of  the 
authorities  of  the  enemy  state."  That  is,  goods 
could  be  consigned  to  no  one  in  Germany ;  they  could 
not  be  shipped  to  Germany  at  all.  It  is  obvious  that 
after  this  action  any  addition  to  the  British  condi- 
tional contraband  list  was  as  complete  a  ban  on  com- 
merce as  an  addition  to  the  absolute  contraband  list. 
The  two  henceforth  were  identical. 

This  action  stopped  our  direct  trade  with  Ger- 
many. It  might  appear  that  goods  on  the  free  list 
could  still  move.  Some  of  them  did  move,  from  free 
to  contraband.  People  feared  to  ship  the  others  lest 
they  should  be  so  listed  while  ships  were  on  the  ocean, 
and  the  goods  made  subject  to  seizure.  Practically 
nothing  has  been  shipped  to  Germany  from  this 
country  but  cotton,  and  it  was  not  shipped  until 
December.  In  belated  response  to  the  insistence  of 
southern  senators  and  of  American  business  inter- 
ests which  had  found  themselves  gravely  embarrassed 


12     ECONOMIC  ASPECTS  OF  THE  WAR 

by  the  cessation  of  cotton  shipments,  Great  Britain 
finally  made  a  clear  statement  that  this  particular 
commodity  would  not  be  considered  contraband. 

So  much  for  direct  trade  with  Germany.  There 
was  still  a  method  by  which  we  should  have  been  able 
to  export  our  goods  and  discharge  our  neutral  obli- 
gations to  trade  with  Germany  as  w^ith  England. 
We  might  have  carried  on  this  trade  via  neutral  ports 
like  Rotterdam  or  Copenhagen,  from  which  the  goods 
might  have  been  shipped  to  Germany.  The  Declara- 
tion of  London  allows  a  belligerent  to  interfere  with 
a  shipment  between  two  neutral  ports  only  when  it 
consists  of  absolute  contraband  for  enemy  territory. 
Conditional  contraband  so  moving  may  not  even  be 
suspected.  The  Order  in  Council  changed  this.  It 
extended  the  new  intention  of  capturing  conditional 
contraband  to  goods  moving  to  Germany  even 
through  a  neutral  port.  And,  as  explained,  condi- 
tional contraband  was  seizable  if  destined  to  anyone 
in  Germany ;  it  was  not  conditional  but  absolute. 

The  British  action,  besides  stopping  our  trade  with 
Germany,  barring  only  a  certain  amount  of  indirect 
trade  carried  on  with  much  difficulty  and  danger, 
subjected  to  grave  peril  our  commerce  wath  other 
neutrals.  The  British  contraband  lists  were  extended 
so  rapidly  that  soon  almost  no  important  article  of 
commerce  with  neutrals  was  free  from  seizure  by 
England,  who  suspected  everything  on  these  lists  as 
being  of  possible  German  destination.  The  shipper 
to  a  neutral  country  then  had  the  prospect  of  a 
British  prize  court  passing  judgment  as  to  whether 


RIGHTS  OF  NEUTRALS  13 

shipments  were  destined  for  Germany  and,  in  the  case 
of  an  affirmative  judgment,  whether  any  compensa- 
tion should  be  paid  the  shipper,  or  his  cargo  simply 
confiscated.  The  uncertainty  was  a  risk  against 
which  no  one  could  insure. 

As  for  the  British  contraband  lists,  a  few  instances 
will  illustrate  how  they  grew.  On  September  21, 
copper,  lead,  rubber,  hides  and  skins  were  added ;  on 
October  29,  motor  vehicles,  motor  tires,  mineral  oil 
and  leather.  On  December  23,  naval  stores  and 
cottonseed  oil  went  on  the  list.  On  March  11,  raw 
wool  was  banned.  The  Germans  have  retaliated  and 
published  a  contraband  list  containing  articles  that 
have  nothing  to  do  with  war,  like  lumber  and  flax. 

Our  protests  against  the  British  August  20  Order 
in  Council  resulted  in  the  substitution  of  an  Order 
dated  October  29.  But  when  we  came  to  observe  the 
operation  of  the  October  29  Order,  we  found  that  it 
did  not  lift  the  ban  on  our  trade  with  Germany  either 
direct  or  via  neutrals,  and  that  it  added  to  the  exist- 
ing difficulties  of  our  trade  with  neutrals  a  prohibi- 
tion of  shipments  "to  order."  This  prohibition  dis- 
located the  ordinary  methods  of  foreign  trade.  Our 
protest  to  England  of  December  26  against  inter- 
ference with  our  trade  with  Europe  failed  to  secure 
any  modification  of  that  interference. 

At  last  a  real  test  was  made  of  the  possibility  of 
provisioning  Germany.  In  Januar}^  a  St.  Louis  firm 
tried  to  get  a  cargo  of  foodstuffs  to  Germany  on  the 
American  steamer  Wilhelmina.  The  provisions  were 
consigned  to  no  one  in  Germany  but  to  a  member  of 


14     ECONOMIC  ASPECTS  OF  THE  WAR 

the  American  firm  who  went  to  Hamburg  to  receive 
the  cargo  and  distribute  it  to  the  civilian  population. 
The  British  stopped  the  vessel.  Unable  to  find  any 
law  for  continuing  the  detention,  they  made  law 
through  a  new  Order  in  Council,  enabling  England 
to  requisition,  without  trial,  the  cargo  of  any  neutral 
ship  brought  into  port.  The  Wilhelmina's  cargo 
was  so  requisitioned. 

On  February  4  Germany,  claiming  that  its  act 
was  a  reprisal  against  an  unlawful  British  attempt 
to  starve  a  civilian  population,  declared  the  waters 
around  the  British  Isles  a  War  Zone  where  British 
merchant  ships  would  be  destroyed  by  German  sub- 
marines— if  necessary,  without  search — and  where 
the  submarines  might  endanger  neutral  vessels  by 
mistake.  Neutrals  were  warned  to  keep  away.  It 
was  stated  that  it  might  be  impossible  to  provide  for 
the  safety  of  passengers  or  crews  of  the  British 
steamers  destroyed. 

When  the  War  Zone  was  announced,  our  govern- 
ment recognized  the  danger,  and  addressed  a  sharp 
note  to  Germany,  warning  that  country  to  be  careful 
not  to  strike  at  American  vessels  or  American  lives. 
At  the  same  time,  we  seemed  to  recognize  in  a  degree 
the  German  point  of  view;  so  we  sent  a  joint  note  to 
Britain  and  Germany  suggesting  that  Britain  give 
up  its  policy  of  stopping  foodstuffs  for  German 
civilians,  that  Germany  abandon  its  submarine  war- 
fare, and  that  both  belligerents  desist  from  mining 
the  high  seas. 

With  certain  reservations  Germany  accepted  the 


RIGHTS  OF  NEUTRALS  15 

proposal.  Great  Britain  rejected  it  and,  indeed, 
instead  of  accepting,  proceeded  to  more  radical  meas- 
ures than  before.  On  March  1,  stating  its  action 
to  be  a  retaliation  against  the  submarine  war  and 
other  alleged  breaches  of  international  law  by  the 
Germans,  England  instituted  a  "blockade"  of  Ger- 
many. The  authorities  at  London  announced  that 
all  vessels  carrying  cargoes  to  or  from  Germany, 
whether  direct  or  via  neutral  ports,  would  be  sub- 
ject to  seizure.  This  was  the  culmination  of  the 
British  lawlessness.  The  culmination  of  the  German 
lawlessness  was  the  Lusitania  horror. 

The  British  "blockade"  terminated  our  cotton 
trade  with  Germany,  virtually  the  only  trade  that 
had  moved.  Whatever  even  of  cotton  thereafter 
found  its  way  to  Germany  was  involved  in  a  smug- 
gling operation.  The  third  largest  buyer  from 
America  became  as  distant  from  us  as  another  world, 
barring  some  dangerous,  indirect  trade.  Moreover, 
all  our  sliipments  to  European  neutrals  adjacent  to 
Germany  now  became  tainted  with  suspicion  and 
detention.  Scores  of  cotton  cargoes  bound  for 
neutrals  have  been  held  up  in  British  ports. 

For  the  first  time  American  importers  of  Ger- 
man goods  saw  their  supplies  endangered;  until 
March  1,  the  flow  of  commerce  from  Germany  had 
been  unhindered.  Our  Federal  Government  faced  a 
loss  of  $20,000,000  per  year  in  customs  revenues 
levied  on  German  goods. 

The  most  striking  circumstances  in  this  extraor- 
dinary situation  is  the  fact  that  Great  Britain  has 


16     ECONOMIC  ASPECTS  OF  THE  WAR 

at  no  time  maintained  a  genuine  blockade.  British 
warships,  fearing  submarines,  dare  not  undertake  a 
close  blockade  of  German  ports.  The  Admiralty 
merely  intercepts  all  traffic  passing  by  Scotland  or 
through  the  English  Channel.  Thus  the  blockade 
does  not  bear  equally  on  all  neutrals,  for  Scandina- 
vian countries  ship  undisturbed  to  German  Baltic 
ports,  from  which  American  products  are  barred. 

This  whole  process  of  gradually  damming  the 
currents  of  trade  to  and  from  one  of  the  members  of 
the  comity  of  nations  has  been  attended  with  huge 
financial  loss  to  the  neutrals.  More  important  than 
this,  these  neutrals,  because  the  British  operations 
have  been  contrary  to  the  accepted  interpretations  of 
international  law,  have  been  put  in  a  position  where 
they  ask  themselves  seriously  whether,  without  violat- 
ing their  neutrality,  they  may  lawfully  continue  to 
trade  with  one  belligerent  which  unlawfully  prevents 
them  from  trading  with  another.  Above  all,  they 
question  the  possibility  of  silent  acquiescence  in  the 
policy  of  both  belligerents  in  abandoning  decent 
restraints  in  their  treatment  of  the  lives  and  property 
of  neutrals. 

The  time  has  arrived  to  revive  the  restraints  and 
reassert  international  law  and  morals. 

The  hfting  of  the  British  "blockade"  will  not 
suffice,  for  we  neutrals  should  then  find  many  of  the 
products  of  peaceful  industry  each  burdened  with 
an  individual  blockade.  That  is,  these  products 
would  be  found  included  in  the  British  contraband 
lists,  with  all  that  that  means  in  the  hindrance  of 


RIGHTS  OF  NEUTRALS  17 

trade  between  neutrals  as  well  as  between  a  neutral 
and  a  belligerent.  If  the  "blockade"  were  lifted  and 
the  October  29  Order  in  Council  and  the  British  con- 
traband lists  kept  in  force,  the  relief  to  neutrals 
would  be  small. 

What  we  need  is  a  code  of  law  and  morals  so 
simple  in  its  terms  that  the  self-interest  of  neither 
belligerent  can  evolve  a  quibbling  interpretation  of 
it  different  from  that  which  neutrals  hold.  In  this 
code  must  be  determined  what  may  be  contraband 
and  what  may  not;  and  it  must  define  the  entire 
method  of  procedure  against  merchant  ships  at  sea. 

There  is  no  time  now,  in  the  midst  of  the  war,  for 
neutral  nations  to  meet  and  devise  such  a  code.  The 
best  we  can  do  is  to  point  to  one  already  in  exist- 
ence: the  Declaration  of  London.  Formed  by  the 
best  legal  talent  of  all  nations,  it  is  fair  and  it  is 
clear. 

Along  with  the  removal  of  England's  illegal  prac- 
tices against  the  goods  of  neutrals  must  go  the 
removal  of  Germany's  illegal  practices  against  their 
goods  and  lives.  Germany  must  restrict  her  swollen 
contraband  list  and  likewise  return  to  the  Declara- 
tion of  London.  She  must  not  use  submarines 
against  unresisting  merchant  vessels  except  to  stop 
and  search  them  in  the  approved  legal  way.  Nor 
may  English  merchant  vessels  under  any  conditions 
be  sunk  until  the  safety  of  crew  and  passengers  has 
been  provided  for. 

Floating  mine  fields  must  be  removed  by  those  who 
laid  them. 


18     ECONOMIC  ASPECTS  OF  THE  WAR 

The  following  chapters  are  a  review  of  the  suc- 
cessive measures  that  led  up  to  the  present  situ- 
ation, and  the  effect  of  those  measures  upon  leading 
articles  of  our  foreign  trade  and  upon  our  neutrality. 
It  will  be  shown  that  it  is  in  America's  power,  as  it 
is  her  duty,  to  restore  international  law  on  behalf  of 
the  neutral  world. 


CHAPTER  II 

The  British  August  Order  in  Council  and  Its 
Effect  on  the  Export  of  Foodstuffs 

The  various  measures  taken  to  restrict  the  trade  of 
neutrals  are  best  reviewed  in  connection  with  a  con- 
sideration of  their  effect  upon  the  trade  in  foodstuffs, 
for  it  was  foodstuffs  against  which  most  of  these 
measures  were  aimed. 

For  a  belhgerent  to  interfere  with  food  moving 
over  the  sea  to  the  civilian  population  of  the  enemy 
is  contrary  to  our  conceptions  of  international  law — 
and  contrary  to  the  conception  formerly  insisted 
upon  by  Great  Britain — unless  such  interference  is 
accomplished  by  means  of  an  effective  blockade. 

Violation  of  the  rights  of  trade  means  violation 
of  the  rights  of  both  parties  trading.  In  this  par- 
ticular case,  one  party  was  Germany  and  one  party 
was  the  United  States.  We  are  less  directly  inter- 
ested in  the  infringement  of  the  right  of  German 
civilians  to  receive  food  than  in  the  infringement  of 
our  right  to  ship  it.  Thomas  Jefferson  even  tells  us 
that  to  send  food  to  one  combatant  and  forego  our 
right  to  send  food  to  the  other  is  a  clear  breach  of 
neutrality.* 

*  For  his  letter  to  Pinckney,  see  Appendix,  p.  318. 


20     ECONOMIC  ASPECTS  OF  THE  WAR 

From  the  early  days  of  August,  1914,  England 
attempted  by  means  lacking  all  legal  recognition  to 
shut  off  the  movement  of  grain,  flour  and  provisions 
to  Germany.  The  frank  object  of  the  action  was  to 
bring  such  pressure  to  bear  upon  the  entire  people 
of  Germany  that  it  would  sue  for  peace.  In  March 
the  "attrition"  campaign  was  given  an  outer  appear- 
ance of  legitimate  practice  by  what  is  generally  de- 
scribed as  a  blockade  of  the  German  coast,  but  what 
is  in  reality  nothing  more  than  an  indefinite  extension 
of  the  law  of  contraband. 

The  control  of  England  over  the  food  supply  of 
the  nations  of  the  world  was  exercised  at  once  after 
the  declaration  of  war.  Britain  ordered  to  her  own 
ports  every  British  steamer  on  the  seas  then  carrying 
foodstuffs  to  Europe.  Their  cargoes  were  unloaded 
and  sold  in  the  British  market,  which  became  glutted 
with  grain.  English  vessels  were  carrying  most  of 
the  world's  trade.  The  diversions  not  only  threw 
into  the  British  market  all  German-bound  grain,  but 
also  all  neutral-bound  grain  in  British  steamers,  and 
assisted  the  government  materially  in  exercising 
pressure  upon  the  neutral  countries  to  comply  with 
certain  policies  of  the  British  Ministry  which  will 
require  later  attention. 

After  this  initial  measure  to  get  control  of  grain 
that  might  be  moving  to  Geraiany  even  via  neutral 
countries,  the  British  Government,  in  its  August  20 
Order  in  Council,  altered  the  status  of  foodstuffs  in 
international  trade  in  war  time.  This  alteration  took 
the  form  of  a  modification  of  the  Declaration  of  Lon- 


THE  AUGUST  ORDER  IN  COUNCIL     21 

don,  which  England  by  that  Order  "accepted"  as  its 
code  of  naval  warfare,  and  with  whose  terms  we  are 
already  familiar. 

It  is  recalled  that  the  Declaration  classified  articles 
of  commerce  as  absolute  contrahandy  conditional 
contraband  or  iree.  Absolute  contraband  might  be 
captured  if  moving  to  an  enemy  either  in  direct  trade 
or  via  neutral  countries.  Conditional  contraband 
might  be  captured  if  moving  direct  to  the  enemy's 
country,  provided  it  could  be  proven  destined  to  the 
enemy's  armed  forces.  The  destination  of  conditional 
contraband  might  not  be  questioned  if  it  were  moving 
to  the  enemy  via  a  neutral ;  that  is,  conditional  con- 
traband so  moving  would  be  immune.  Goods  on  the 
free  list  could  move  unhindered  to  the  enemy's  coun- 
try in  either  direct  or  indirect  trade.  Goods  from  the 
enemy's  country  might  not  be  stopped  except  by  an 
effective  blockade. — Foodstuffs  were  conditional 
contraband. 

Translated  into  terms  of  the  present  war,  the 
Declaration  prescribed  that  no  interference  should 
occur  in  trade  between  the  United  States  and  Hol- 
land, or  Scandinavia,  except  in  the  case  of  ships 
which  could  be  proven  to  carry  absolute  contraband, 
like  arms  and  ammunition — with  ultimate  German 
destination. 

There  could  be  no  interference  with  the  movement 
into  Germany  of  such  goods  on  the  Declaration's 
free  list  as  cotton,  rubber  and  hides.  There  could 
be  no  hindrance  of  our  export  to  Germany  of  con- 
ditional contraband  like  grain,  flour  and  provisions, 


22     ECONOMIC  ASPECTS  OF  THE  WAR 

unless  it  could  be  proved  by  England  that  such  ship- 
ments were  destined  for  the  German  state  or  its 
armed  forces.  All  foodstuffs  moving  to  the  civilian 
population  of  Germany  were  immune  from  capture. 
This  question  of  army  or  civilian  destination  could 
not  be  raised  if  the  food  were  moving  to  Germany 
via  Holland  or  Scandinavia. 

The  Declaration  prescribed  that  there  could  be  no 
interference  in  the  movement  of  any  goods  from 
Germany  to  the  United  States  unless  in  the  event  of 
an  effective  blockade  of  Germany. 

The  things  which  by  the  Declaration  of  London 
Great  Britain  was  obligated  not  to  do  gradually 
came  to  constitute  a  fairly  good  record  of  what  she 
actually  did.  Step  by  step,  the  Britisli  Admiralty 
interfered  with  the  shipment  to  neutral  countries  of 
the  most  innocent  goods,  like  cotton,  requisitioning 
the  cargoes  for  British  purposes.  Rubber  was  haled 
into  the  absolute  contraband  list ;  hides  were  eventu- 
ally made  absolute  contraband.  Neither  food  nor 
other  conditional  contraband  was  allowed  to  get  to 
Germany,  either  by  direct  sailing  or  via  neutral 
ports.  Without  the  maintenance  of  a  genuine  block- 
ade, the  export  of  all  goods  from  Germany  to  the 
United  States  was  finally  made  impossible. 

The  first  of  these  serious  "modifications"  of  the 
Declaration  of  London,  appearing  in  the  British 
August  20  Order  in  Council,  was  a  change  in  the 
Declaration's  contraband  lists.  Aeroplanes  were 
made  absolute  contraband;  they  were  conditional  in 
the  Declaration.     The  change  was  unimportant  in 


THE  AUGUST  ORDER  IN  COUNCIL     23 

itself  but  it  introduced  a  policy  that  led  to  the 
greatest  abuses. 

The  second  and  more  dangerous  change  was  in  the 
treatment  of  conditional  contraband,  which  was  law- 
fully liable  to  capture  only  if  it  could  be  shown  des- 
tined to  the  enemy  state  or  its  armed  forces.  The 
obligation  of  proof,  as  always  under  international 
law,  lay  upon  the  captor.  Such  hostile  destination, 
the  Declaration  specified,  might  be  presumed  if  the 
foodstuffs  were  consigned  to  the  enemy  authorities  or 
to  a  contractor  in  enemy  country  publicly  known  to 
supply  the  enemy ;  or  if  the  foodstuffs  were  sailing  to 
a  fortified  place  or  base  serving  the  armed  enemy 
forces.  That  is,  food  ships  consigned  to  ordinary 
merchants,  not  army  purveyors,  and  sailing  to  com- 
mercial ports,  were  to  be  immune.  As  the  Declara- 
tion says,  "In  cases  where  the  above  presumptions  do 
not  arise,  the  destination  is  presumed  to  be  innocent." 

So  much  for  the  law  regarding  conditional  contra- 
band. What  did  its  British  "modification"  provide? 
It  provided  that  destination  for  the  hostile  forces 
might  be  "inferred  from  any  sufficient  evidence'*  and 
experience  proved  that  a  mere  suspicion  in  the  mind 
of  the  British  naval  captain  was  sufficient  evidence 
to  detain  ships.  Moreover,  in  the  new  British-made 
law,  destination  for  enemy  forces  was  to  be  presumed 
if  the  goods  were  consigned  to  or  for  an  agent  of  the 
enemy  state  or  to  or  for  a  merchant  or  other  person 
under  control  of  the  authorities  of  the  enemy  state.'* 

This  "modification"  made  direct  shipment  of  foods 
to  Germany  impossible.     It  abolished  the  difference 


24     ECONOMIC  ASPECTS  OF  THE  WAR 

between  absolute  and  conditional  contraband ;  hence- 
forth neither  could  move.  The  prize  court  judges 
who  must  administer  this  new  sort  of  international 
law  were  thereby  prevented  from  allowing  the  civilian 
population  of  Germany  to  get  foodstuffs  from 
America.  Such  foodstuffs  must  obviously  be  shipped 
to  someone.  There  is  no  one  in  Germany  or  any 
other  land  who  is  not  either  "an  agent  of  the  enemy 
state  or  a  merchant  or  other  person  in  control  of 
the  authorities  of  the  enemy  state.'* 

To  be  sure,  the  shipment  might  be  consigned  "to 
order,"  but  events  showed  that  the  "evidence"  would 
then  be  "sufficient"  to  "infer"  destination  to  the 
enemy's  forces. 

Yet  this  did  not  exhaust  the  sweep  of  the  British 
change  in  international  law  as  brought  forth  in  the 
Order  in  Council  of  August  20.  There  still  remained 
the  possibility  of  provisioning  Germany  by  shipping 
to  Rotterdam,  Copenhagen,  Gothenburg  or  Genoa, 
and  thence  forwarding  into  Germany.  Against  inter- 
ference with  conditional  contraband  so  moving,  stood 
the  clear  and  unmistakable  provisions  of  the  Declara- 
tion of  London.    It  read : 

"Conditional  contraband  is  not  liable  to  capture 
except  when  on  board  a  vessel  bound  for  territory 
belonging  to  or  occupied  by  the  enemy  .  .  .  and  when 
it  is  not  to  be  discharged  in  an  intervening  neutral 
port." 

If  food  is  to  be  discharged  in  a  neutral  port,  its 
destination  is  not  subject  to  suspicion. 


THE  AUGUST  ORDER  IN  COUNCIL     25 

That  IS,  applying  the  Declaration  to  the  geog- 
raphy of  the  war,  food  bound  for  Germany,  even  if 
destined  for  military  consumption,  might  lawfully  be 
stopped  only  if  shipped  directly  to  Germany  or 
Belgium,  not  if  shipped  to  Germany  through  Dutch 
or  Scandinavian  ports. 

The  reason  for  this  last  provision  is  simple.  It 
would  be  a  disturbance  of  trade  sufficiently  serious  if 
doubtful  foodstuffs  moving  from  America  direct  to 
Germany  were  to  be  subject  to  the  review  of  English 
judges  on  the  often  debatable  question  whether  their 
destination  were  civil  or  military.  It  would  become 
insufferable  if  international  law  should  enable  the 
British  authorities  to  halt  food  consigned  to  Scandi- 
navian merchants  and  pass  upon  the  dual  question, 
first,  the  possibility  of  German  destination,  and  next, 
the  possibility  of  German  army  destination. 

Such  power  would  enable  the  British  judges  to  ruin 
trade  between  America  and  Scandinavia,  upon  the 
mere  suspicion  that  some  of  the  goods  might  be 
leaking  through  to  Germany.  Great  Britain  might 
use  this  annoying  power  over  Scandinavia  and  Hol- 
land to  force  them  to  refuse  to  trade  with  Germany 
in  articles  of  their  own  growth  and  manufacture. 
Therefore  international  law  forbids  England  the 
right  to  suspect  that  shipments  to  neutral  countries 
have  German  military  destination.  International  law 
forbids  England  the  right  to  guard  against  such 
indirect  shipment,  in  the  interest  of  the  higher  right 
of  neutral  trade  which  would  thereby  be  exposed  to 
the  constant  peril  of  a  prejudiced  interpretation. 


26     ECONOMIC  ASPECTS  OF  THE  WAR 

Experience  has  demonstrated  the  justice  of  these 
principles.  And  yet  Great  Britain  in  its  August  20 
Order  proceeded  to  disregard  them.  That  Order 
provided  that  conditional  contraband,  if  destination 
to  enemy  forces  could  be  shown,  was 

"liable  to  capture  at  whatever  port  the  cargo  is  to  be 
discharged." 

But,  as  we  already  know,  destination  to  enemy 
forces  was  assumed  if  the  goods  were  moving  to 
Germany  at  all.  Conditional  contraband,  such  as 
foodstuffs,  could  not  move  to  Germany  via  a  neutral 
country  just  as  they  could  not  move  direct. 

After  barring  neutral  trade  with  Germany  in  all 
goods  on  the  absolute  and  conditional  contraband 
lists,  England  then  increased  these  lists  by  adding 
to  them  articles  that  were  either  free  or  unclassified 
in  the  Declaration  of  London;  such  as  rubber, 
copper,  wool,  hides  and  leather.  Shippers  feared  to 
ship  most  goods  not  on  the  contraband  lists,  for  fear 
they  might  be  added  to  those  lists.  The  result  of  all 
this  was  so  severe  that  when  the  British  began  their 
"blockade,"  on  March  1,  the  effect  of  it  was  not 
severely  felt  so  far  as  traffic  from  America  was  con- 
cerned, excepting  for  cotton.  Trade  in  most  of  our 
other  important  exports  had  already  been  stopped. 

It  is  necessary  to  bear  these  facts  in  mind  because, 
six  months  after  hostilities  began,  we  find  England 
solemnly  declaring  that,  as  a  retaliation  against  the 
barbarities  of  German  warfare,  it  may  find  itself 
obliged  to  institute  reprisals  and  shut  off  the  oversea 


THE  AUGUST  ORDER  IN  COUNCIL     27 

supplies  of  Germany,  particularly  food.  Germany, 
in  the  light  of  history,  has  a  better  right  to  call  her 
acts  reprisals,  for  the  British  policy  began  on  August 
20,  1914. 

Yet  the  action  of  England  went  further  than  the 
measures  described.  There  was  still  a  possibiHty  that 
Germany  might  be  supplied  with  food  or  other  com- 
modities via  neutral  countries.  This  trade  could 
move  from  America  to  merchants  in  Holland  or  Scan- 
dinavia, who  would  take  delivery  and  later  resell  into 
Germany,  attracted  by  the  magnet  of  high  prices 
prevailing  there. 

Two  means  were  taken  to  prevent  this  resale 
trade.  In  the  first  place  pressure  was  brought  to 
bear  upon  steamship  lines,  plying  from  the  United 
States  to  European  neutral  countries,  not  to  accept 
shipments  of  articles  on  the  British  contraband  lists 
unless  each  such  shipment  were  accompanied  by  a 
sworn  statement  by  the  shipper  to  the  effect  that 
the  goods  were,  to  the  best  of  his  knowledge  and 
belief,  for  bona  fide  consumption  in  the  neutral 
country.  The  steamship  companies  required  such  an 
affidavit  because  without  it  the  vessel  faced  deten- 
tion by  England  while  the  uncertified  shipment  was 
being  taken  off.  The  fact  that  the  neutral  shipment 
was  uncertified  might  then  in  the  British  prize  court 
be  "sufficient  evidence"  to  prove  it  destined  to  the 
German  military. 

In  spite  of  this,  there  was  a  chance  that  some  mer- 
chant in  neutral  Europe  might  deceive  the  American 
shipper  who,  after  all,  could  give  no  guarantee  of  the 


28     ECONOMIC  ASPECTS  OF  THE  WAR 

ultimate  destination  of  his  goods,  once  they  were 
delivered  abroad.  This  contingency  Great  Britain 
met  by  inducing  the  European  neutral  governments 
to  lay  re-exportation  embargoes  upon  articles  in  the 
British  absolute  and  conditional  contraband  lists. 
That  is,  the  neutrals  were  brought  to  pass  laws  penal- 
izing any  citizen  for  reselling  into  another  country 
these  articles  when  imported.  A  neutral  government 
which  did  not  take  this  precaution  might  find  that 
the  absence  of  a  re-export  embargo  upon  goods  was 
"sufficient  evidence"  to  presume  their  destination  to 
the  German  military  and  the  neutral's  own  supplies 
from  America  would  then  be  detained  in  England. 

The  working  of  this  system  may  be  illustrated  by 
the  case  of  Holland.  It  is  recalled  that  at  the  out- 
break of  the  war  Great  Britain  at  once  summoned  to 
home  ports  all  British  steamers  carrying  foodstuffs 
to  Europe,  and  that  the  cargoes  were  sold  in  the 
English  markets.  For  example,  770,000  bushels  of 
wheat  moving  to  Rotterdam  were  so  diverted  to  Eng- 
lish ports.  This  wheat  was  needed  by  the  Dutch 
millers. 

Holland  was  allowed  to  import  no  foodstuffs  for 
herself,  and  before  the  end  of  August  the  government 
of  that  country  was  willing  to  enact  any  embargo 
and  give  any  guarantees  that  Great  Britain  wanted. 
On  August  23  a  Dutch  Minister  of  State  announced 
this,  in  an  interview  published  in  London.  On  the 
following  day  the  London  Corn  Exchange  asked 
Sir  Edward  Grey  for  permission  to  export  grain  to 
Holland,  since  the  people  of  that  country  were  suf- 


THE  AUGUST  ORDER  IN  COUNCIL     29 

fering  from  a  food  shortage  and  would  not  be  in  a 
position  to  export  any  of  the  wheat  to  Germany. 
Sir  Edward  felt  compelled  to  refuse  their  request,  so 
the  London  despatches  said,  on  the  ground  that  the 
strength  of  the  German  army  on  the  Dutch  frontier 
might  be  so  great  that  Holland  could  not  guard  its 
own  food  supply. 

No  doubt  the  strength  of  the  German  army  was  a 
factor  that  influenced  Sir  Edward's  attitude.  The 
strength  of  the  Germany  araiy  on  the  borders  of 
Holland  did  not  decrease,  yet  he  eventually  did  let 
food  into  Holland.  If  he  had  not,  the  Dutch  would 
have  starved  as  the  Belgians  did.  But  he  waited  not 
only  until  the  Dutch  Government  laid  an  export  em- 
bargo on  foodstuffs  but  also  until  the  Dutch  Govern- 
ment agreed  to  act  as  the  sole  consignee  of  all  contra- 
band and  conditional  contraband  moving  into 
Holland.  Merchants  importing  grain,  flour  and 
provisions  had  to  transmit  to  the  government  their 
demands  and  furnish  it  with  funds  and  guarantees. 
The  government  in  turn  guaranteed  to  England  that 
all  of  these  imports  would  be  consumed  within  Dutch 
borders. 

In  the  course  of  time  the  work  of  handling  all 
imports  for  Holland  became  too  heavy  for  the  Dutch 
Government.  Its  departments  were  not  equipped  for 
commercial  operations.  Therefore  under  govern- 
ment auspices  the  Netherlands  Oversea  Trust  was 
formed,  composed  of  prominent  Dutch  business  men. 
To  it  were  henceforth  consigned  all  goods  on  Brit- 
ain's contraband  lists  except  grain,  flour,  petroleum 


30     ECONOMIC  ASPECTS  OF  THE  WAR 

and  copper,  which  still  could  be  sent  only  to  the 
government  direct.  The  Holland- American  Line,  the 
only  regular  steamers  between  America  and  Holland, 
bound  itself  to  accept  contraband  goods  only  when 
consigned  to  the  government  or  the  trust.* 

Before  this  arrangement  had  been  worked  out  in 
Holland  and  before  the  other  European  neutrals  had 
taken  measures  satisfactory  to  Great  Britain,  they 
had  all  fallen  into  real  want  because  of  a  restriction 
of  their  food  imports.  Throughout  October  the 
newspapers  of  Denmark,  Norway  and  Sweden  con- 
tained complaints  about  the  detention  of  grain  and 
food  shipments  by  England.  Under  such  conditions 
it  is  not  strange  that  by  early  November  those  coun- 
tries had  placed  the  most  stringent  embargoes  on  the 
export  of  food.  It  appears  from  our  note  to  Great 
Britain  of  December  26  that  the  British  Government 
had  consented,  in  November,  to  be  satisfied  with  the 
guarantees  offered  by  the  Norwegian,  Swedish  and 
Danish  Governments  as  to  non-exportation  of  "con- 
traband goods"  when  consigned  to  named  persons  in 
the  territory  of  those  governments,  and  that  orders 
had  been  given  to  restrict  interference  with  neutral 
vessels,  so  consigned,  to  verification  of  ship's  papers 
and  cargoes. 

*  American  exporters  have  never  been  enthusiastic  about 
this  arrangement.  In  the  fall  of  1914  they  protested  against 
the  Dutch  Government  assuming  a  monopoly  of  flour  purchases 
for  Holland.  It  was  claimed  that  this  monopoly,  in  sup- 
planting the  normal  competition  of  Dutch  dealers,  prevented 
Americans  from  getting  a  competitive  price  for  their  flour. 


THE  AUGUST  ORDER  IN  COUNCIL     31 

No  one  in  this  country  worried  about  the  restric- 
tion of  our  grain  and  provisions  trade  with  Germany 
and  the  adjacent  neutrals.  We  shall  see  that,  be- 
cause of  the  distress  of  the  cotton  planters,  largely 
due  to  the  impossibility  of  getting  cotton  started 
for  Germany,  there  was  a  successful  agitation  in 
October  to  have  the  British  ban  taken  off  cotton. 
But  no  one  was  in  distress  about  grain. 

It  is  true  that  in  the  first  weeks  of  the  war  srain 
did  not  move  out  of  this  country,  for  reasons  con- 
cerned with  the  general  maritime  situation.  The 
uncertainty  of  the  North  Atlantic  lanes,  until  Great 
Britain  had  cleared  them  of  German  cruisers,  forbade 
vessels  to  venture  out.  As  soon  as  England  was  alone 
in  the  North  Atlantic,  neutral  and  British  vessels 
were  safe  from  capture.  Then  there  were  initial  dif- 
ficulties of  insurance  and  especially  of  finance  to  be 
overcome.  Bills  drawn  on  foreign  buyers  were  un- 
salable ;  for  the  London  discount  market,  throusch 
which  these  would  ordinarily  be  turned  into  funds  by 
the  American  bankers,  had  temporarily  broken  down. 
Requisitioning  of  British  vessels  by  the  Admiralty 
served  to  reduce  the  tonnage  available  for  carrying 
grain  or  any  other  commercial  cargo. 

Large  purchases  of  our  grain  were  made  by  foreign 
buyers  in  the  last  week  of  July  and  the  first  week  in 
August.  But  at  that  time  the  goods  could  not  be 
moved  out  of  this  country.  Grain  left  interior 
centers  for  the  seaboard,  filled  elevators  at  the  ports 
and  intermediary  points  like  Buffalo,  and  lay  in  cars 
that  choked  the  Atlantic  terminal  yards  of  the  rail- 


32    ecoxo:mic  aspects  of  the  war 

roads.  Railroads  to  New  Orleans  and  Galveston 
stopped  receiving  grain  for  export  until  the  situation 
at  the  ports  should  clear  up. 

Yet  all  this  caused  little  worry  to  the  farmer. 
The  purchases  of  exporters  and  their  continual 
bidding  for  grain  drove  up  the  prices  paid  on  the 
farm.  The  world  began  to  see  that  we  were  to  feed 
Europe,  especially  when  it  considered  Russia's  par- 
ticipation in  the  war  and  the  stoppage  of  her 
exports. 

Every  day  the  farmer  saw  his  property  in  wheat 
grow  more  valuable.  On  July  18,  1914,  cash  wheat 
(No.  2  Red  Winter)  was  selling  in  New  York  for 
88  cents  per  bushel.  On  July  24  it  was  92,  on  July 
29  it  was  98%.  Wheat  sold  from  95  cents  to  $1 
during  the  first  half  of  August.  On  August  17  it 
touched  102%  and  was  never  again  below  $1.  On 
September  1,  cash  wheat  sold  for  1201/2*  Until 
December,  when  the  next  rapid  advance  took  place, 
wheat  sold  in  New  York  for  prices  varying  between 
115  and  125.  With  the  cereal  selling  at  125,  the 
farmer  who  still  held  his  wheat  was  being  paid  37 
cents  per  bushel  more  than  on  July  18,  when  the 
New  York  price  was  88  cents.  The  capital  of  the 
man  who  owned  wheat  had  increased  over  44  per 
cent. 

On  December  18,  the  price  reached  130%.  It 
rose  almost  without  interruption  to  138  on  Jan- 
uary 2,  to  145%  on  January  7,  to  1531/4  on  Jan- 
uary 14.  On  January  27  the  price  touched  160. 
On  February  4  it  was  176%.     From  then  until  the 


THE  AUGUST  ORDER  IN  COUNCIL     33 

last  of  May  it  fluctuated  often  violently  between 
160  and  175.  This  averaged  fully  100  per  cent 
higher  than  the  88  cents  which  was  being  paid  for 
wheat  in  New  York  in  the  middle  of  July,  1914. 
Early  in  July,  1915,  spot  wheat  still  sold  for  130, 
though  the  September  option,  due  to  the  expecta- 
tion of  a  large  American  crop,  was  below  110. 

Once  the  financial  and  shipping  difficulties  had 
been  removed,  wheat  was  exported  at  the  rate  of 
1,000,000  bushels  per  day.  Countries  like  Italy  and 
Greece,  which  had  always  bought  heavily  from  the 
Black  Sea,  had  to  buy  in  America.  Scandinavia, 
which  had  secured  rye  from  Russia  and  East  Ger- 
many, had  to  substitute  rye  and  wheat  from  Amer- 
ica. France  found  part  of  its  harvest  appropriated 
by  the  invading  Germans,  who  also  occupied  all  of 
Belgium.  The  various  relief  funds  for  Belgium, 
notably  the  Rockefeller  Commission,  began  pur- 
chasing food,  largely  grain  and  flour,  at  the  rate  of 
$7,000,000  per  month. 

Obviously  no  one  was  needed  to  come  to  the  rescue 
of  the  wheat  farmer.  His  constant  interest  has  been 
in  the  continuance  of  the  war,  just  as  the  constant 
interest  of  the  cotton  farmer  has  been  in  its  conclu- 
sion. Peace  rumors  send  the  grain  market  down. 
They  send  the  cotton  market  up.  The  Turk,  in  clos- 
ing and  holding  the  Dardanelles,  thus  interning  the 
Russian  wheat  supply,  has  been  the  American 
farmer's  best  hired  man.  The  price  of  wheat  on  our 
markets  would  be  reduced  along  with  the  forts  at 
Kilid  Bahr. — While  Wall  Street  prayed  for  peace, 


34     ECONOMIC  ASPECTS  OF  THE  WAR 

the  Produce  Exchange,  a  few  blocks  away,  prayed 
for  the  war  to  go  on. 

As  with  wheat,  so  with  flour.  Winter  patents  sold 
in  the  third  week  in  July  for  $5  per  barrel.  On 
August  11  the  same  flour  was  $5.25.  On  August 
25  it  was  $5.75;  on  September  25,  $6.  Here  the 
price  remained  until  the  last  week  in  December, 
when  it  sold  at  $6.50.  The  next  week  the  price  was 
$6.75.  Then  the  rise  was  rapid,  reaching  $8.25  on 
February  1.  This  about  corresponded  with  the 
summit  of  the  wheat  prices.  From  February  1  on, 
the  price  long  averaged  $7.50.  Compared  with  the 
price  of  $5  in  July,  1914,  the  advance  was  very 
perceptible.  To  be  sure,  it  did  not  represent  clear 
profit,  such  as  the  wheat  advance  represented  to  the 
farmer  or  the  middleman.  The  miller  had  to  pay 
more  for  some  of  the  wheat  in  his  1915  flour  than  for 
the  wheat  in  his  1914  flour.  Nevertheless,  even  the 
millers,  who  chronically  complain,  confessed  to  some 
degree  of  prosperity  because  of  the  war. 

From  August  1,  1913,  to  May  31,  1914,  we  ex- 
ported 75,600,000  bushels  of  wheat,  receiving  there- 
for $71,800,000.  In  the  August-May  months  of 
1914-1915,  the  war  year,  we  sent  abroad  224,000,000 
bushels  and  were  paid  $297,000,000.  In  these 
months  of  1913-1914  we  exported  10,200,000  barrels 
of  wheat  flour,  for  which  we  were  paid  $46,750,000. 
In  the  August-May  period  just  past  we  were  paid 
$85,000,000  for  14,400,000  barrels.  On  the  other 
hand,  high  prices  which  foreigners  paid  to  farmers 
were  matched  by  the  equally  high  prices  paid  for 


THE  AUGUST  ORDER  IN  COUNCIL     35 

grain  and  flour  by  domestic  users.  This  was  one  of 
the  less  cheerful  sides  of  the  boom  in  the  export  food 
trade. 

Indeed,  the  concern  of  the  government  was  not 
to  see  that  the  miller  and  the  farmer  got  their  rights, 
but  to  see  that  the  miller  and  the  grain  speculator  did 
not  rob  the  public.  On  August  18,  1914,  an  agent 
of  the  department  of  justice  was  a  visitor  at  Minne- 
apolis flour  mills,  inquiring  as  to  the  sudden  rise  in 
the  price  of  flour.  At  the  beginning  of  1915  both 
New  York  and  the  Federal  Government  were  investi- 
gating the  sensational  rise  in  the  price  of  wheat,  and 
trying  to  discover  in  it  the  machinations  of  specu- 
lators. It  was  found  that  the  old  law  of  supply  and 
demand  was  operating.  The  usual  Russian  supplies 
were  cut  ofl*  from  neutral  countries.  The  Allies 
were  consuming  more  heavily  than  ever,  and  their 
own  crops  were  short.  With  everyone  bidding  for 
American  wheat  and  flour,  prices  naturally  advanced. 

It  is  clear,  therefore,  that  the  American  farmers 
and  millers  did  not  suff^er  because  they  did  not  ship 
to  Germany.  Had  they  been  able  to  do  this,  wheat 
and  flour  would  have  been  higher  than  they  were  and 
our  citizens  would  have  made  still  more  money  than 
they  did,  for  Germany's  demand  would  have  been 
added  to  that  of  the  rest  of  belligerent  and  neutral 
Europe.  But  our  grain  and  flour  people  did  fairly 
well. 

Under  these  circumstances,  naturally,  no  great 
agricultural  interests  went  to  Washington  to  clamor 
for   freedom   of   foodstuff^s   shipments   to   Germany, 


36     ECONOxMIC  ASPECTS  OF  THE  WAR 

Yet  the  principle  at  issue  was  no  less  vital  than  if 
large  losses  had  been  involved.  The  historian  of  the 
future  will  find  it  difficult  to  reconcile  our  insistence 
on  the  movement  of  cotton  because  we  needed  the 
cotton  money,  with  our  acquiescence  in  the  stoppage 
of  the  grain  and  provisions  movement  because  we  did 
not  need  the  grain  and  provisions  money. 

Nor  will  it  suffice  to  say  that  Germany,  by  self- 
denial,  did  pull  through,  in  spite  of  stoppage  of  food 
from  America.  Our  rights  and  our  duty  were  neg- 
lected, even  if  neglect  of  our  rights  did  not  mean 
distress  to  any  of  our  citizens  and  even  if  neglect  of 
our  duty  did  not  result  in  the  starvation  of  Germany. 

Moreover,  the  farmer  will  perhaps  not  find  himself 
untouched.  September  wheat  at  less  than  $1.10  in 
New  York  in  July,  1915,  meant  well  under  $1  per 
bushel  on  the  farm.  The  contrast  with  the  price  the 
farmer  received  for  his  last  year's  crop  will  be  strik- 
ing. The  contrast  will  be  intensified  if  the  Darda- 
nelles fall  and  Russian  wheat  is  let  loose. 

Above  all,  the  final  British  measure,  the  "blockade" 
of  Germany,  has  established  a  new  practice,  a  new 
definition  of  blockade  which  may  in  the  future  be  of 
the  very  greatest  harm  to  the  farmer.  This  feature 
of  the  question  is  reserved  for  Chapter  V. 


CHAPTER  III 

Foodstuffs    Under    International    Law.      The 
October  Order  in  Council 

What  we  considered  our  rights  in  the  matter  of 
trading  with  belligerents  was  early  in  the  war  set 
forth  in  an  announcement  of  our  State  Department 
declaring  that  such  trade,  except  in  contraband  of 
war,  was  lawful  and  might  go  forward.  On  August 
15,  1914,  the  State  Department  published  the  follow- 
ing: 

"The  existence  of  war  between  foreign  govern- 
ments does  not  suspend  trade  or  commerce  between 
this  country  and  those  at  war.  The  right  to  con- 
tinue to  trade  with  belligerents  is  upheld  by  the 
well-recognized  principles  of  international  law. 

"Conditional  contraband  consists,  generally  speak- 
ing, of  articles  which  are  susceptible  of  use  in  war 
as  well  as  for  purposes  of  peace ;  in  consequence,  their 
destination  determines  whether  they  are  contraband 
or  non-contraband. 

"Articles  of  the  character  stated  are  considered 
contraband  if  destined  to  the  army,  navy  or  depart- 
ment of  government  of  one  of  the  belligerents  or  to 
a  place  occupied  and  held  by  military  forces ;  if  not 
so  destined,  they  are  not  contraband,  as,  for  example, 
when  bound  to  an  individual  or  a  private  concern." 

This  theoretical  right  of  America  to  ship  food  to 
Germany,    asserted   August    15,   was    cancelled   five 


38     ECONOMIC  ASPECTS  OF  THE  WAR 

days  later  by  tlie  British  Order  in  Council  whose  pro- 
visions we  already  know.  In  August  and  September 
of  1913  we  shipped  4,700,000  bushels  of  wheat  to 
Germany;  in  August  and  September,  1914,  we 
shipped  none.  In  August  and  September,  1913,  we 
sent  to  Germany  20,500  barrels  of  flour;  in  August 
and  September,  1914,  only  65  barrels.  In  August 
and  September,  1913,  we  sent  to  Germany  $4,100,000 
of  lard;  in  August  and  September,  1914,  not  a 
dollar's  worth.  The  comparatively  small  sales  even 
in  1913  are  of  course  no  measure  of  what  Germany 
would  have  taken  in  the  war  year  1914. 

Noting  the  disappearance  of  shipments  from  over- 
sea, Berlin  protested  in  early  October.  In  a  note 
handed  to  foreign  diplomats  in  Berlin  on  October 
10,  Germany  called  attention  to  the  violations  of  the 
Declaration  of  London  by  the  August  Order  in 
Council  and  the  British  September  21  contraband 
list.  The  protest  was  directed  partly  against 
Britain's  absolute  disregard  of  the  contraband  list 
established  in  the  Declaration,  especially  against 
making  rubber,  hides,  skins  and  certain  kinds  of  iron 
ore  contraband.  However,  the  chief  complaint  was 
against  the  British  "modification"  which  abolished 
the  meaning  and  the  privileges  of  conditional  contra- 
band and  made  it  as  impossible  for  food  to  move  into 
Germany  as  for  cartridges.  Finally,  the  protest 
asked  neutral  nations  what  they  were  going  to  do 
about  these  attacks  upon  their  rights,  and  intimated 
that  Germany  would  not  engage  to  abide  longer  by 


THE  OCTOBER  ORDER  IN  COUNCIL    39 

the  Declaration  of  London  if  Great  Britain  persisted 
in  violating  it. 

The  German  protest  was  cabled  to  our  government 
on  October  22.  Our  answer  was  sent  shortly  after. 
We  replied  that  the  United  States  had  withdrawn  its 
suggestion,  made  early  in  the  war,  that  for  the  sake 
of  uniformity  the  Declaration  of  London  should  be 
adopted  as  a  temporary  code  of  warfare.  We  with- 
drew the  suggestion  because  certain  belligerents 
refused  to  adopt  the  Declaration  without  changes 
and  modifications.  Thenceforth,  our  reply  con- 
tinued, during  the  war,  the  United  States  and  its 
citizens  would  rely  for  protection  upon  the  existing 
rules  of  international  law. 

None  of  the  rights  of  trade  with  belligerents  is 
more  firmly  established  by  the  well-recognized  prin- 
ciples of  international  law  than  is  the  right  to  trade 
in  food  for  the  civilian  population.  This  is  a  prin- 
ciple upheld  by  us  in  the  past,  and  upheld  with 
especial  stress  by  the  English  Government,  when 
Great  Britain  was  a  neutral.  Continuously  since 
the  eighteenth  century  Britain  has  asserted  that  food 
was  not  contraband  unless  destined  to  a  belligerent 
government  "or  its  military  forces. 

In  1885  China  was  at  war  with  France.  France 
declared  rice  contraband  of  war,  with  the  purpose 
of  starving  China  into  submission.  The  declaration 
met  with  immediate,  sharp  and  successful  opposition 
from  Great  Britain.  Lord  Granville,  British  Minis- 
ter for  Foreign  Affairs,  wrote  the  French  Govern- 
ment that  regarding  foodstuffs  "there  must  be  cir- 


40     ECONOxMIC  ASPECTS  OF  THE  WAR 

cumstanccs  relative  to  any  particular  cargo,  or  its 
destination,  to  displace  the  presumption  that  articles 
of  tills  kind  are  intended  for  the  ordinary  use  of  life." 

Is  there  any  distinction  between  the  French  act  of 
declaring  foodstuffs  contraband  of  war,  and  the 
British  instituting  of  measures  that  made  it  impos- 
sible to  ship  them  to  a  belligerent  even  though  they 
were  left  on  the  conditional  contraband  list? 

America  also  interested  itself  in  the  French  case 
of  1885.  The  American  Minister  at  Berlin  wrote 
our  Secretary  of  State  regarding  it.  He  called 
attention  to  the  fact  that  an  immense  portion  of  our 
exports  consisted  of  foodstuffs.  Every  European 
war,  he  added,  produced  an  increased  demand  for 
these  exports.  The  French  doctrine  attempted  to 
stop  food  even  when  bound  for  civilians.  If  food, 
he  went  on,  can  thus  be  captured,  clothing,  the  instru- 
ments of  industry  and  all  less  vital  supplies  can  be 
cut  oft*,  on  the  ground  that  they  tend  to  support  the 
efforts  of  the  belligerent  nation. 

"Indeed,  the  real  principle  involved  goes  to  this 
extent,  that  everything  the  want  of  which  will  in- 
crease the  distress  of  the  civil  population  of  the  bel- 
ligerent country  may  be  declared  contraband  of  war. 

"The  entire  trade  of  neutrals  with  belligerents  may 
thus  be  destroyed,  irrespective  of  an  effective  block- 
ade of  ports.  War  itself  would  become  more  fatal 
to  neutral  states  than  to  belligerent  interests.^* 

This  letter  might  have  been  written  In  the  same 
words  regarding  the  manipulation  of  the  British 
contraband  list  in  the  present  war. 


THE  OCTOBER  ORDER  IN  COUNCIL    41 

The  next  instance  to  the  point  arose  in  the  Boer 
War.  Lord  Salisbury  was  asked  to  state  the  position 
of  the  British  Government  regarding  the  movement 
of  foodstuffs  to  the  Boers.     He  said : 

"Foodstuffs  with  a  hostile  destination  can  be  con- 
sidered contraband  of  war  only  if  they  are  supplies 
for  the  enemy's  forces.  It  is  not  sufficient  that  they 
are  capable  of  being  so  used ;  it  must  be  sJiown  that 
this  was  in  fact  their  destination  at  the  time  of  the 


Yet  the  same  British  Government  in  1914  chose  to 
cancel  its  own  clearly  expressed  interpretation  of 
international  law,  by  decreeing  that  provisions  should 
not  move  to  Germany  "if  consigned  to  a  merchant  or 
other  person  in  control  of  the  authorities  of  the 
enemy  state." 

Again,  in  1904,  Great  Britain  and  the  United 
States,  acting  in  co-operation,  opposed  successfully 
the  action  of  Russia  in  seizing  a  cargo  of  flour  and 
railway  material  consigned  to  private  concerns  in 
Japan.  In  describing  the  representations  of  the 
British  Government  to  Russia,  regarding  food  ship- 
ments. Lord  Lansdowne  wrote  Mr.  Choate,  then  our 
Ambassador  to  England: 

"The  test  appeared  to  be  whether  there  are  cir- 
cumstances relating  to  any  particular  cargo  to  show 
that  it  is  destined  for  military  or  naval  use." 

Further  than  that.  Lord  Lansdowne  clearly  stated 
that  Great  Britain  did  not  propose  to  be  bound  by 


42     ECONOMIC  ASPECTS  OF  THE  WAR 

the  decision  of  a  Russian  prize  court,  if  tlie  court  did 
not  abide  by  the  principle  already  stated. 

"His  JMajesty's  Government  further  pointed  out 
that  the  decision  of  the  prize  court  of  the  captor  in 
such  matters,  in  order  to  be  binding  on  neutral 
states,  must  be  in  accordance  with  the  recognized 
rules  and  principles  of  international  law  and  pro- 
cedure." 

The  words  of  Lord  Lansdowne  might  have  been 
quoted  in  our  first  note  of  protest  to  England,  on 
December  26. 

In  this  same  Russo-Japanese  War  in  1904,  our 
Secretary  of  State,  John  Hay,  instructed  our 
Ambassador  at  St.  Petersburg  to  make  representa- 
tions to  the  Imperial  Russian  Government  in  no  un- 
certain terms.  He  was  to  communicate,  in  part,  as 
follows : 

"When  war  exists  between  powerful  states  it  is 
vital  to  the  legitimate  maritime  commerce  of  neutral 
states  that  there  be  no  relaxation  of  the  rule — no 
deviation  from  the  criterion  for  determining  what 
constitutes  contraband  of  war,  lawfully  subject  to 
belligerent  capture,  namely:  warlike  nature,  use  and 
destination.  Articles  which,  like  arms  and  ammuni- 
tion, are  by  their  nature  of  self-evident  warlike  use, 
are  contraband  of  war  if  destined  to  enemy  territory ; 
but  articles  which,  like  coal,  cotton  and  provisions, 
though  if  ordinarily  innocent  are  capable  of  warlike 
use,  are  not  subject  to  capture  and  confiscation 
unless  shown  by  evidence  to  be  actually  destined  for 
the  military  or  naval  forces  of  a  belligerent. 


THE  OCTOBER  ORDER  IN  COUNCIL    43 

"If  the  principle  which  appears  to  have  been 
declared  by  the  Vladivostok  prize  court  and  which 
has  not  so  far  been  disavowed  or  explained  by  His 
Imperial  Majesty's  Government  is  acquiesced  in,  it 
means,  if  carried  into  full  execution,  the  complete 
destruction  of  all  neutral  commerce  with  the  non- 
combatant  population  of  Japan;  it  obviates  the 
necessity  of  blockades ;  it  renders  meaningless  the 
principle  of  the  Declaration  of  Paris  set  forth  in  the 
Imperial  Order  of  February  29  last  that  a  blockade 
in  order  to  be  obligatory  must  be  effective;  it  oblit- 
erates all  distinction  between  commerce  in  contra- 
band and  non-contraband  goods,  and  is  m  effect  a 
declaration  of  war  against  commerce  of  every  descrip- 
tion between  the  people  of  a  neutral  and  those  of  a 
belligerent  state.^* 

What  of  the  British  treatment  of  our  foodstuffs 
under  the  Order  in  Council  of  August  20?  Was  it  in 
any  respect  different  from  the  action  which  John 
Hay  so  resolutely  opposed  in  1904?  It  was  not. 
England  as  a  belligerent  has  followed  the  mischievous 
precedent  of  Russia  in  the  same  attempt  which  John 
Hay  and  Lord  Lansdowne  defeated  in  1904.  His 
Majesty's  Government  in  1914-1915  proceeded  to 
a  "complete  destruction  of  all  neutral  commerce  with 
the  non-combatant  population"  of  Germany,  except- 
ing what  might  fortuitously  be  smuggled  via  adja- 
cent neutrals.  It  can  be  said  of  the  English  policy 
as  well  as  of  Russia's  that  it  "obliterates  all  dis- 
tinction between  contraband  and  non-contraband 
goods" ;  and  that  it  "is  in  effect  a  declaration  of  war 
against  commerce  of  every  description  between  the 
people  of  a  neutral  and  those  of  a  belligerent  state." 


44     ECONOMIC  ASPECTS  OF  THE  WAR 

It  is  clear,  tlicrcforc,  not  only  that  the  partially 
abandoned  Declaration  of  London  gave  to  this  coun- 
try the  right  to  send  foodstuffs  to  Germany,  but  that 
the  common  law  of  nations  to  which  our  government 
reverted,  the  law  established  by  precedent  and  by  the 
opinion  of  high  authority,  endorsed  our  right  with 
equal  emphasis. 

It  is  not  to  be  assumed  that  the  problem  thus  pre- 
sented to  our  government  was  wholly  overlooked.  In 
October  of  1914  the  State  Department  made  certain 
representations,  never  published,  to  Great  Britain. 
It  cannot  be  said  that  this  action  failed  of  result.  A 
new  Order  in  Council  was  called  forth.  The  Order  in 
Council  of  October  29 — superseding  that  of  August 
20 — contained,  together  with  some  apparent  modifi- 
cations of  terms,  a  variety  of  provisions  that  made 
the  new  regulations  in  reality  more  severe  upon 
neutral  trade  and  more  subversive  of  established  legal 
principles  than  the  rulings  which  had  called  forth 
our  protest.  As  in  August,  so  in  October,  the  Order 
in  Council  "accepted"  the  Declaration  of  London 
subject  to  the  modifications  in  the  Order. 

To  be  sure.  Great  Britain  has  contended  that  the 
October  Order  in  Council  was  an  amelioration  of  the 
severity  of  that  of  August  20.  In  his  February  10 
note  to  us.  Sir  Edward  Grey  thus  refers  to  the 
October  Order : 

"Your  Excellency  will  remember  the  prolonged 
discussions  that  took  place  between  us  throughout 
the  month  of  October  with  a  view  to  finding  some  new 
formulae  which  would  enable  us  to  restrict  suppHes  to 


THE  OCTOBER  ORDER  IN  COUNCIL    45 

the  enemy  forces  and  to  prevent  the  supply  to  the 
enemy  of  materials  essential  for  the  making  of  muni- 
tions of  war,  while  inflicting  the  minimum  of  injury 
and  interference  with  neutral  commerce.  It  was  with 
this  object  that  the  Order  in  Council  of  the  29th  of 
October  was  issued,  under  the  provisions  of  which  a 
far  greater  measure  of  immunity  was  conferred  upon 
neutral  commerce." 

But  the  greater  measure  of  immunity,  upon  closer 
examination,  did  not  appear. 

So  far  as  direct  shipment  to  Germany  was  con- 
cerned, the  new  Order  provided  that  hostile  and  for- 
bidden destination  of  food  and  other  conditional  con- 
traband— that  is,  destination  for  enemy  forces — 
should  be  presumed  in  all  cases  allowed  by  the 
Declaration  of  London,  and  that  the  presumption 
should  further  be  made, 

"if  the  goods  were  consigned  to  or  for  an  agent  of 
the  enemy  state."     (Paragraph  II.) 

This  appeared  in  terms  to  be  a  material  modifica- 
tion of  the  August  ruling  which  had  included  among 
forbidden  destinations  not  merely  "an  agent  of  the 
enemy  state"  but  also  "a  merchant  or  other  person 
under  control  of  the  authorities  of  the  enemy  state," 
which  evidently  meant  anyone  within  the  enemy's 
boundaries. 

But  unfortunately  everyone  within  the  enemy's 
boundaries  was  construed  as  an  agent  of  the  enemy 
state.  That  is,  any  consignee  in  Germany  would 
have  to  prove  before  a  British  prize  court  that  he 


46     ECONOMIC  ASPECTS  OF  THE  WAR 

was  not  an  agent  of  the  state.  He  would  have  the 
impossible  task  of  proving  this  before  the  prize 
courts  of  a  country  which  officially  identified  the 
civil  with  the  military  population  of  Germany.  In 
his  February  10  note,  Sir  Edward  Grey  clearly  states 
this  identity  as  the  British  Government's  reason  for 
putting  the  burden  of  proof  upon  the  captured 
instead  of  upon  the  captor : 

"In  the  peculiar  circumstances  of  the  present 
struggle,  where  the  forces  of  the  enemy  comprise  so 
large  a  proportion  of  the  population,  and  where  there 
is  so  little  evidence  of  shipments  on  private  as  dis- 
tinguished from  government  account,  it  is  most 
reasonable  that  the  burden  of  proof  should  rest  on 
the  claimant." 

In  view  of  the  small  English  army  in  the  early 
months  of  the  war  it  may  have  seemed  to  Sir  Edward 
that  the  forces  of  the  enemy  comprised  a  large  pro- 
portion of  the  population.  But,  adhering  to  the 
facts,  there  were  not  6,000,000  Germans  under  arms 
when  he, wrote  the  February  note.  The  population 
of  Germany  being  nearly  70,000,000,  the  chances 
vrere  eleven  and  one-half  to  one  that  foodstuffs  for 
Germany  were  destined  for  the  civil  rather  than  the 
military  population. 

By  its  perversion  of  the  law  of  evidence  the  Octo- 
ber Order  in  Council  was  as  effective  as  that  of 
August  20  in  preventing  any  direct  trade  in  food 
with  Germany.  We  know  this  better  than  we  should 
know  it  if  food  shipments  had  been  sent  and  held  up 
in  England.    We  know  it  because  no  one  even  dared 


THE  OCTOBER  ORDER  IN  COUNCIL    47 

to  send  a  shipment — until  the  case  of  the  Wilhelmina 
in  January,  considered  in  the  next  chapter. 

Having  thus  kept  the  ban  on  direct  trade  with 
Germany  in  conditional  contraband,  the  Order  then 
proceeded  to  make  more  difficult  than  ever  the  con- 
duct of  trade  with  Germany  via  neutrals  and  even 
the  trade  between  America  and  neutrals  themselves. 

Paragraph  35  of  the  Declaration  of  London,  if 
observed,  provides  that  the  German  destination  of 
conditional  contraband,  like  food,  shall  not  be  the 
concern  of  England  if  the  food  is  to  be  discharged 
in  an  intervening  neutral  port.  The  October  Order 
replaced  this  with  the  following: 

III.  "Notwithstanding  the  provisions  of  Article 
35  of  said  Declaration,  conditional  contraband  shall 
be  liable  to  capture  on  board  a  vessel  bound  for  a 
neutral  port  if  the  goods  are  consigned  'to  order,' 
or  if  the  ship's  papers  do  not  show  who  is  the  con- 
signee of  the  goods,  or  if  they  show  a  consignee  of 
the  goods  in  territory  belonging  to  or  occupied  by 
the  enemy." 

IV.  "In  the  cases  covered  by  the  preceding  para- 
graph (HI)  it  shall  lie  upon  the  owners  of  the  goods 
to  prove  that  their  destination  was  innocent." 

That  is,  goods  moving  from  us  to  European  neu- 
trals were  subject  to  capture  if  consigned  to  anyone 
in  Germany,  if  the  neutral  consignee  was  not  named, 
or  if  the  sliipment  was  "to  order"  of  a  neutral.  If 
the  goods  were  going  to  Germany  the  owner  himself 
must  prove  that  they  were  not  for  the  German  mili- 
tary.    The  proof,  as  we  have  seen,  was  impossible. 


48     ECONOMIC  ASPECTS  OF  THE  WAR 

Therefore  nothing  was  so  shipped.  It  cannot  be  too 
strongly  emphasized  that  the  laxvful  procedure  is  for 
England,  the  captor,  to  prove  that  the  German 
destination  of  conditional  contraband  is  a  guilty  one ; 
that  is,  a  destination  to  the  military. 

We  now  come  to  strictly  neutral  commerce,  be- 
tween America  and  Scandinavia,  for  example,  to 
which  England,  according  to  Sir  Edward  Grey,  had 
conferred  "a  far  greater  measure  of  immunity" 
through  the  October  Order  in  Council.  The  reverse 
is  true.  Every  burden  put  upon  that  commerce  by 
the  August  Order  remained,  and  there  was  added  the 
prohibition  of  shipments  "to  order."  Shipments  "to 
order"  were  not  formally  prohibited  but  they  were 
declared  subject  to  capture,  and  in  the  ensuing  prize 
court  the  owner  must  then  prove  their  innocent  desti- 
nation. Even  if  a  shipper  felt  certain  of  his  ability 
to  prove  this,  he  would  be  mad  to  ship  "to  order,"  for 
this  would  mean  a  delay  of  his  goods  in  England  for 
several  months,  until  they  reached  their  place  on  the 
calendar  of  the  prize  court.  Shipments  "to  order" 
ceased  as  soon  as  the  British  action  was  known. 

The  ruling  against  neutral  shipments  consigned 
"to  order"  disarranged  the  established  method  of 
financing  our  exports  of  foodstuffs.  Ordinarily  the 
exporter  draws  on  a  Swedish  buyer,  for  example,  and 
sells  the  draft  to  an  American  bank.  The  bank  buys 
the  draft  on  condition  of  being  allowed  to  retain 
possession  of  the  shipping  documents  until  the  pur- 
chaser pays.  The  goods  are  then  forwarded,  but  are 
consigned,  not  to  the   Swedish  buyer,  but   "to  the 


THE  OCTOBER  ORDER  IN  COUNCIL    49 

order'^  of  the  American  bank.  The  bank  sends  the 
draft  and  the  documents  representing  the  goods  to 
its  Swedish  correspondent,  with  instructions  to  deliver 
them  to  the  buyer  upon  payment  being  made  or  as- 
sured. This  general  practice  was  prohibited  by  the 
British  Order.  In  a  large  number  of  instances  neu- 
tral buyers  were  put  to  the  great  inconvenience — for 
some  an  impossibility — of  providing  money  in  New 
York  before  the  goods  were  shipped. 

A  pertinent  case,  illustrating  the  operation  of  this 
part  of  the  Order,  was  that  of  five  steamers,  under 
charter  to  an  American  line  and  containing  American 
packing  house  products  consigned  to  Scandinavia 
"to  order."  Three  of  the  ships  sailed  from  New 
York  before  the  October  Order  was  announced  and 
the  other  two  before  it  was  known  in  this  country. 
In  spite  of  this  the  steamers  were  forced  to  call  at 
Kirkwall  and  were  then  ordered  to  proceed  to  Hull 
and  other  British  east  coast  ports,  where  their  long 
period  of  detention  began. 

These  steamers  were  the  Alfred  Nobel,  the  Bjom- 
stjeme  Bjornson,  the  Kim,  the  Fridland,  and  the 
Arkansas.  They  were  Norwegian  steamers  which 
the  Gans  Steamship  Company  of  New  York  had 
taken  over  on  a  long  term  charter.  Months  went  by 
and,  in  spite  of  all  protests  from  the  Americans  in- 
terested and  from  the  State  Department,  the  steam- 
ers and  their  cargoes  lay  in  the  British  ports.  They 
were  held  there,  inactive,  at  a  time  when  they  might 
have  been  earning  $12  per  bale  carrying  cotton  to 
Rotterdam.     This  would  have  been  equivalent  to  net 


50     ECONOMIC  ASPECTS  OF  THE  WAR 

earnings  of  $13,000  per  day  for  the  four  steamers: 
$13,000  clear  after  paying  charter  money  and 
operating  expenses. 

November,  December,  January,  February  and 
March  passed,  without  it  being  possible  to  get  any 
action  on  the  vessels.  The  money  of  the  American 
provision  exporters  was  in  the  meantime  tied  up. 
Their  drafts  had  been  returned  to  them,  as  the  goods 
had  never  been  delivered.  The  shippers  were  of  course 
co-operating  with  the  shipowners  in  pressing  the 
matter  in  London  and  in  attempting  to  get  the  State 
Department  to  do  something  for  them. 

Finally,  a  hearing  was  set  for  April  13.  On  that 
day  the  attorneys  of  the  shipowners  and  shippers 
appeared  in  a  prize  court  In  London.  The  British 
Attorney  General  moved  for  a  delay  in  the  case,  in 
behalf  of  the  British  Government.  He  said  that  these 
cases  were  very  complicated  because  of  the  large 
number  of  individual  shipments  on  each  boat.  He 
said  that  each  shipment  must  be  Investigated  in 
America,  and  this  took  time.  He  said  that  the 
American  shippers  should  have  gotten  in  touch  with 
the  British  Government  before  they  made  these 
shipments  "to  order."    He  pleaded  for  delay. 

Sir  Samuel  Evans,  w^ho  was  presiding  over  the 
prize  court,  granted  the  contention  of  the  Attorney 
General.  He  exonerated  the  Attorney  General  of 
all  charges  of  unnecessary  delay  and  Insisted  that 
the  cases  were  too  complicated  to  be  rushed.  The 
judge  of  the  prize  court,  following  the  October  29 
Order  in  Council,  which  was  his  law,  had  to  consider 


THE  OCTOBER  ORDER  IN  COUNCIL    51 

that  prisoners  at  the  bar  were  guilty  until  they 
could  prove  themselves  innocent.  Since  the  vessels 
sailed  before  the  Order  was  known  in  America,  the 
British  prize  court  procedure  established  that  British 
laws  are  retroactive.  Eventually  a  hearing  was  set 
for  June  7,  seven  months  after  these  cargoes,  des- 
tined to  neutral  ports,  had  been  seized.  There  were 
more  postponements  and  at  the  end  of  July,  1915, 
the  cases  were  still  unsettled. 

Such  was  the  effect  of  the  prohibition  of  neutral 
shipments  "to  order." 

The  last  feature  of  the  October  Order  which  we 
need  consider  is  one  designed  to  force  European 
neutrals  not  to  send  supplies  to  Germany  even  of 
their  home  growth  and  manufacture.  This  measure 
is  one  of  the  most  extraordinary  occurrences  of  the 
war.    The  October  Order  read: 

(IV.  2)  "Where  it  is  shown  to  the  satisfaction  of 
one  of  His  Majesty's  principal  secretaries  of  state 
that  the  enemy  government  is  drawing  supplies 
for  its  armed  forces  from  or  through  a  neutral  courts 
try,  he  may  direct  that  in  respect  of  ships  bound  for 
a  port  in  that  country,  Article  35  of  the  said  Decla- 
ration shall  not  apply.  Such  direction  shall  be  noti- 
fied in  the  London  Gazette  and  shall  operate  until  the 
same  is  withdrawn.  So  long  as  such  a  direction  is  in 
force,  a  vessel  which  is  carrying  conditional  contra- 
band to  a  port  in  that  country  shall  not  be  immune 
from  capture." 

In  plain  language,  if  a  British  agent  reported  that 
Holland  or  Sweden  was  feeding  Germany  either  with 
American   or   Swedish   food,   one  of  His  Majesty's 


52     ECONOMIC  ASPECTS  OF  THE  WAR 

principal  secretaries  of  state  could  direct  British 
cruisers  to  capture  food  shipments  from  America  to 
the  offending  neutral.  It  is  no  restriction  of  the 
omnipotence  of  these  secretaries  to  say  they  might 
proceed  to  capture  if  it  is  shown  to  their  "satisfaction 
that  the  enemy  government  is  drawing  supplies  for 
its  armed  forces  from  or  through  a  neutral  country." 
Anything  for  Germany  was  presumed  to  be  for  the 
armed  forces ;  for,  according  to  British  naval  prac- 
tice and  to  the  public  contentions,  of  British  Minis- 
ters, the  German  military  and  the  German.-  civilian 
population  are  regarded  as  one.  Since  October  29 
our  commerce  with  European  neutrals,  has  been 
carried  on  with  permission  of  the  British  authorities 
who  in  the  October  Order  were  given  charge-  of  that 
commerce. 

Neither  Sweden  nor  any  other  neutral  was  to  be 
allowed  to  send  to  Germany  food  which  it  raised  and 
supply  the  deficiency  by  abnormal  importations 
from  America.  After  the  October  29  Order  re- 
exportation embargoes  on  goods  in  the  British  con- 
traband lists  did  not  suffice  to  keep  European 
neutrals  innocent  in  the  eyes  of  England.  It  was 
necessary  for  them  to  lay  simple  embargoes  on  the 
exportation  of  these  goods,  including  food,  even  if 
the  trade  was  in  the  neutral  country's  own  product. 

Nor  did  the  export  embargoes,  when  laid,  suffice. 
Nothing  did.  Even  after  neutral  governments  ad- 
justed themselves  to  the  British  August  and  October 
Orders,  there  occurred  incessant  detentions  and  seiz- 
ures of  food  ships,  especially  those  bound  for  Holland 


THE  OCTOBER  ORDER  IN  COUNCIL    53 

and  the  Scandinavian  countries.  Under  conceptions 
of  law  with  which  no  one  could  learn  how  to  comply, 
cargoes  of  perishable  goods  were  held  up  for  months 
in  British  harbors. 

Our  Department  of  State  has  finally  published  a 
list  of  the  seizures  of  our  vessels.  In  the  first  eleven 
months  of  the  war  Britain  seized  2,000  vessels  with 
American  cargoes  destined  for  Europe.  In  his  note 
of  January  7,  Sir  Edward  Grey  stated  that  773 
vessels  left  our  shores  between  August  4  and  January 
3  for  Holland,  Scandinavia  and  Italy.  Of  these  773 
vessels,  he  said,  there  were  45  from  which  part  or  all 
of  the  cargo  was  thrown  into  prize  court.  Eight  of 
the  ships  themselves  were  so  treated.  This  gives  no 
indication  of  the  loss,  borne  entirely  by  neutral 
shippers  and  shipowners,  due  to  the  detention,  un- 
loading and  annoyance  of  the  many  vessels  about 
which  nothing  suspicious  even  to  the  English  mind 
could  be  found.  It  gives  no  indication  of  the  injury 
to  neutral  commerce  through  discouragement  and 
intimidation,  through  the  well-grounded  fear  that 
while  a  perfectly  innocent  shipment  was  on  the  high 
seas.  His  Majesty's  Council  might  legislate  some 
new  "international"  law  which  would  make  the  ship- 
ment subject  to  capture. 

In  the  meantime  the  patience  of  the  United  States 
Government  had  become,  exhausted.  On  December 
26  the  Secretary  of  State  addressed  a  note  to  our 
Ambassador  at  London,  to  be  handed  to  Sir  Edward 
Grey.  The  note  admitted  the  propriety  of  Britain 
stopping  contraband  for  the  enemy.     It  states  that, 


64}     ECONOMIC  ASPECTS  OF  THE  WAR 

in  case  of  conditional  contraband,  the  policy  of  Great 
Britain  was  unjustified  by  the  established  rules  of 
international  conduct.  It  claimed  that  the  seizure 
of  cargoes  consigned  "to  order"  to  neutral  countries 
was  not  legal.  It  quoted  Lord  Salisbury  to  show 
that  even  if  our  foodstuffs  were  destined  for  hostile 
territory,  they  could  not  be  lawfully  seized  unless  it 
could  be  proven  that  they  were  for  the  enemy  forces. 
The  Government  of  the  United  States  admitted  the 
right  to  search  and  detain  ships  bound  from  America 

**when  there  Is  sufficient  evidence  to  justify  a  belief 
that  contraband  articles  are  in  their  cargoes ;  but 
His  Majesty's  Government,  judging  by  their  own 
experience  in  the  past,  must  realize  that  this  govern- 
ment cannot  without  protest  permit  American  ships 
or  American  cargoes  to  be  taken  into  British  ports 
and  there  detained  for  the  purpose  of  searching 
generally  for  evidence  of  contraband;  or  upon  the 
presumption  created  hy  special  municipal  enactments 
•which  are  clearly  at  variance  with  international  law 
and  practice,^' 

Finally,  our  note  stated  that  American  shippers 
and  producers,  deprived  of  established  markets,  were 
calling  for  relief;  and  that  unless  this  were  obtained, 
there  might  arise  in  this  country  a  feeling  contrary 
to  that  which  had  so  long  existed  between  the  Ameri- 
can and  the  British  people. 

Great  Britain  sent  two  answers  to  this  protest ;  a 
preliminary  answer  dated  January  7,  and  a  final  one 
dated  February  10.  The  January  7  reply  is  a  not 
uninteresting  document,  though  neither  this  commu- 


THE  OCTOBER  ORDER  IN  COUNCIL    55 

nication  nor  the  one  which  followed  it  conceded  in 
the  slightest  degree  the  American  demands. 

The  first  declared  purpose  of  the  British  note  of 
January  7  was  to  "clear  the  ground  and  remove  some 
misconceptions  that  seem  to  exist."  The  author,  Sir 
Edward  Grey,  then  accepted  the  principle  that  a 
belligerent  should  not  interfere  with  trade  between 
neutrals  unless  such  interference  were  necessary  to 
protect  the  belligerent's  national  safety.*  Great 
Britain,  he  continued,  was  ready  to  keep  its  action 
within  these  limits  on  the  understanding  that  it 
retained  the  right  to  interfere  in  what  was  not  "bona 
fide"  trade  between  neutrals  but  really  contraband 
destined  for  the  enemy's  country.  Whenever  its 
action  unintentionally  exceeded  this  principle.  Great 
Britain,  he  said,  was  ready  to  make  redress. 

Sir  Edward  then  told  us  that  we  were  wrong  in 
assuming  that  our  industries  were  suffering  from  the 
loss  of  their  usual  market.  As  conclusive  proof  he 
cited  the  figures  of  export  from  New  York  to  Italy, 
Holland  and  Scandinavia.  In  November,  1914,  we 
exported  to  Denmark  $7,100,000  of  goods,  compared 
with  $560,000  in  November,  1913.  We  sent  $2,860,- 
000  to  Sweden,  compared  with  $380,000.  We  sent 
$2,320,000  to  Norway,  compared  with  $480,000. 
We  sent  $4,780,000  to  Italy,  compared  with  $2,980,- 
000.  We  sent  $3,960,000  to  Holland,  compared  with 
$4,390,000. 

*The  "necessity  of  protecting  the  belligerent's  national 
safety"  is  the  excuse  offered  for  every  wrong  committed  in 
this  war. 


56     ECONOMIC  ASPECTS  OF  THE  WAR 

The  note  passed  over,  naturally,  the  fact  that  our 
November  exports  to  Germany  were  only  $40,000, 
compared  with  $48,000,000  in  1913,  or  that  our 
exports  to  Austria  fell  from  $1,970,000  in  Novem- 
ber, 1913,  to  nothing  in  1914.  It  did  not  inform 
its  readers  that  the  figures  he  gave  were  those  of 
our  exports  that  started  for  European  neutrals. 
How  much  got  past  His  Majesty's  cruisers  was 
another  story. 

Moreover,  the  note  implied  that  our  larger  exports 
to  the  Scandinavian  countries  consisted  solely  of 
articles  destined  for  Germany,  and  hence  subject  to 
British  interference.  But,  according  to  another  part 
of  the  same  note.  Great  Britain  was  interfering  only 
with  "contraband  destined  for  the  enemy's  country." 
By  that  test  Britain  could  lawfully  have  interfered 
with  only  such  of  the  excess  exports  to  European  neu- 
trals as  represented  absolute  contraband — since  the 
Declaration  of  London  allows  neutrals  to  receive  con- 
ditional contraband  unmolested — and  even  such  a 
course  would  have  assumed  that  all  such  merchandise 
had  a  German  destination. 

As  a  matter  of  fact,  the  excess  of  exports  to 
European  neutrals  was  to  some  degree  destined  for 
Germany.  The  point  is  that  free  goods  and  condi- 
tional contraband  had  a  right  so  to  move.  How- 
ever, much  of  the  excess  was  for  the  neutrals  them- 
selves. They  had  need  of  larger  imports  from  us 
than  ever  before.  For  example,  they  had  formerly 
bought  from  Germany  their  copper  products.  Ger- 
many was  keeping  her  copper  at  home.     Therefore 


THE  OCTOBER  ORDER  IN  COUNCIL    57 

the  neutrals  needed  to  import  raw  copper  in  larger 
quantities  than  before,  in  order  to  make  their  own 
copper  products.  Our  copper  exports  to  neutrals 
were  the  most  suspicious  thing  Sir  Edward  Grey 
found.  Similarly,  we  exported  more  cotton  to  the 
neutrals  because  their  own  mills  were  making  cotton 
piece  goods  that  had  been  coming  from  Germany,  and 
supplying  foreign  markets  to  which  Germany  was 
denied  access. 

Above  all,  the  neutrals  needed  more  foodstuffs. 
East  Germany  usually  exports  large  quantities  of 
wheat  flour  and  of  rye  to  Scandinavia.  Not  only 
was  this  cut  off,  but  the  ordinary  shipments  of  wheat 
and  rye  from  Russia  dropped,  first  because  of 
Russia's  export  embargo  (finally  lifted)  and  later, 
to  a  degree,  because  of  Germany's  control  of  the 
Baltic  Sea.  The  closed  Dardanelles  kept  Russian 
Black  Sea  supplies  locked  up.  Both  Russian  and 
German  supplies  had  to  be  replaced  by  supplies  from 
the  United  States. 

The  British  note  has  only  the  following  brief 
reference  to  foodstuffs: 

"With  regard  to  the  seizure  of  foodstuffs  to  which 
your  Excellency  refers,  His  Majesty's  Government 
are  prepared  to  admit  that  foodstuffs  should  not  be 
detained  and  put  into  a  prize  court  without  pre- 
sumption that  they  are  intended  for  the  armed  forces 
of  the  enemy  or  the  enemy  government.  We  believe 
that  this  rule  has  been  adhered  to  in  practice  hitherto, 
but,  if  the  United  States  Government  has  instances 
to  the  contrary,  we  are  prepared  to  examine  them, 
and  it  is  our  present  intention  to  adhere  to-  the  rule 


58     ECONOMIC  ASPECTS  OF  THE  WAR 

thougli  we  cannot  give  an  unlimited  and  uncondi- 
tional undertaking  in  view  of  tlie  departure  by  those 
agaiJist  whom  we  arc  fighting  from  hitherto  accepted 
rides  of  citilization  arid  hiimajiity  and  the  uncer- 
tainty as  to  the  extent  to  which  rules  may  be  violated 
by  them  in  future,'' 

In  the  face  of  the  conditions  which  we  have  re- 
viewed, we  are  touched  by  tlie  simple  "behef"  of  His 
Majesty's  Government  that  they  had  adhered  to 
international  law  hitherto. 

However,  Britain  was  preparing  the  way  to  insti- 
tute severer  measures,  should  the  need  arise.  The 
italicized  clauses  can  be  translated  into  ordinary 
English.  They  mean:  "We  cannot  unconditionally 
agree  to  continue  to  adhere  to  the  limits  of  law. 
Our  enemy  has  departed  from  the  rules  of  civiliza- 
tion: therefore  we  may  insist  upon  having  a  free 
hand  in  the  future." 

Here  was  the  theory  that  England  was  fighting 
our  battle,  and  that  of  the  civilized  world.  To 
assume  that  the  United  States  would  calmly  agree 
to  this  proposition  was  a  clear  imputation  that  this 
country  was  not  genuinely  neutral  and  would  be 
willing  so  to  confess. 

The  obstructive  tactics  of  the  British  Government 
were  to  be  put  to  a  severe  test  by  the  case  of  the 
American  steamship  Wilhelmina,  with  which  we  shall 
now  deal. 


CHAPTER  IV 
The  Wilhelmina — A  Test  Case 

Early  in  1915  the  question  whether  our  merchants 
could  send  foodstuffs  to  Germany,  when  not  intended 
for  the  government  or  for  the  armed  forces  of  that 
country,  was  sharply  tested  in  a  case  which  merits 
its  own  comer  in  history.  This  was  the  case  of  the 
steamship  Wilhelmina.     America  lost  the  case. 

The  Wilhelmina  was  of  American  registry,  and  was 
under  charter  to  the  W.  T.  Green  Commission  Com- 
pany of  St.  Louis,  a  concern  engaged  previously  to 
the  war  in  exporting  provisions  to  Germany.  Noting 
the  statement  of  Sir  Edward  Grey  in  his  January  7 
note,  that  Great  Britain  was  not  considering  food- 
stuffs contraband  unless  destined  for  the  govern- 
ment or  armed  forces  of  the  enemy,  the  St.  Louis 
merchants  determined  to  take  advantage  of  this 
expression  in  an  effort  toward  the  resumption  of 
their  trade.  Accordingly  they  loaded  on  the  Wil- 
helmina a  cargo  of  grain,  flour  and  provisions  to  the 
value  of  $200,000,  and  despatched  the  vessel  from 
Brooklyn  on  January  22,  with  saiHng  papers  for 
Hamburg  and  under  conditions  such  as  to  put  the 
British  policy  very  clearly  to  the  test. 

The  goods  were  not  consigned  "to  or  for  an  agent 
of  the  enemy  state,"  or  even,  recaUing  the  wording 


60     ECONOMIC  ASPECTS  OF  THE  WAR 

of  tlic  August  Order  in  Council,  "to  or  for  a 
merchant  or  other  person  under  the  control  of  the 
authorities  of  the  enemy  state,"  at  least  in  any 
reasonahle  interpretation.  Nor  were  they  consigned 
"to  order."  Instead,  the  consignment  was  made  to 
Mr.  Brooking,  manager  of  the  W.  T.  Green  Com- 
pany, who  sailed  in  advance  for  Hamburg  to  receive 
the  cargo  on  arrival.  The  food  was  going  to  an 
American  citizen. 

There  was  nothing  in  any  British  Order  in  Council 
making  shipments  so  consigned  subject  to  seizure. 
Further,  the  cargo  went  forward  with  the  endorse- 
ment of  the  State  Department,  Mr.  Bryan  having 
stated  that  he  saw  no  reason  for  action  against  the 
vessel  by  His  Majesty's  authorities.  It  was  evident 
that  if  Great  Britain  were  to  seize  the  Wilhelmina, 
some  new  excuse  must  be  found  for  such  action. 

The  manner  In  which  the  British  public  looked 
upon  the  voyage  of  the  Wilhelmina  was  apparent 
from  the  tone  of  British  newspapers  from  the  day 
the  vessel  sailed.  A  single  instance,  typical  of  many, 
will  illustrate.  On  January  26  the  London  Morning 
Post  discussed  the  case  In  an  editorial,  saying  that 
this  was  another  test  prepared  by  the  friends  of 
Germany  in  America  for  the  Injury  of  British  inter- 
ests.    The  editorial  proceeded: 

"This  Is  a  more  plausible  and  more  insidious 
experiment  than  the  Dacia,  and  if  it  Is  allowed,  will 
be  more  injurious  to  the  cause  of  the  Allies. 

"At  present  German  food  prices  are  but  little,  if 
at  all,  higher  than  British  food  prices,  but  the  Allies 


THE  WILHELMINA  CASE  61 

hope  that  if  the  blockade  continues,  in  time  it  will 
become  extremely  irksome  for  the  German  people  to 
continue  at  war,  owing  to  the  increasing  scarcity  of 
food,  and  that  they  will  desire  their  government  to 
discontinue  the  war. 

"If  Americans  will  fairly  consider  it,  this  is  the 
most  merciful  way  of  ending  such  a  conflict,  which 
otherwise  may  continue  to  rage  until  the  manhood 
of  Europe  is  destroyed. 

"There  is  a  right  and  wrong  in  this  war,  and  the 
United  States  by  their  public  opinion  have  already 
shown  where  they  believe  the  right  to  lie.  Will  they 
now  say  that  interest  is  more  important  than  right, 
and  money  than  justice  and  liberty?  We  cannot 
believe  it  of  a  nation  which  has  the  tradition  and  the 
origin  of  the  United  States." 

Nothing  could  be  plainer.  The  voyage  of  the 
Wilhelmina  was  an  attempt  to  thwart  England's 
starvation  campaign.  In  view  of  Great  Britain's 
fight  for  civilization,  America  should  stand  aside, 
should  waive  its  legal  rights  and  its  commercial 
interests.  Evidently  the  British  press  was  not  of 
the  impression  that  their  government  had  been  allow- 
ing food  for  civilians  to  proceed  to  Germany,  as 
implied  in  Grey's  January  7  note,  where  he  said  no 
foodstuffs  had  been  seized  except  upon  presumption 
of  destination  for  enemy  forces.  The  Wilhelmina 
was  recognized  as  an  insidious  attempt  to  get  in 
motion  a  shipment  for  civilians,  for  the  first  time. 

On  January  25  the  German  authorities,  on  behalf 
of  the  imperial  government,  confiscated  all  supplies 
of  grain  and  flour  in  the  empire.  Such  action  was 
to  be  followed  by  government  distribution  of  these 


62     ECONOMIC  ASPECTS  OF  THE  WAR 

foodstuffs,  with  the  purpose  of  diminishing  the  con- 
sumption and  thereby  assuring  the  sufficiency  of  the 
existing  stock  until  the  harvest  in  July.  Mere 
appeals  to  the  Germans  to  reduce  their  use  of  bread 
had  apparently  not  sufficed  to  conserve  the  supply. 
The  confiscation  specifically  did  not  affect  all  foods, 
but  only  those  for  which  shortage  threatened; 
namely,  grain  and  flour. 

This  Decree  was  announced  on  the  evening  of  Jan- 
uary 25.  It  was  known  outside  of  Germany  on  the 
26th.  On  the  27th  the  London  press  announced  that 
all  food  in  and  for  Germany  was  now  subject  to 
seizure;  that  it  was  therefore  to  be  considered  from 
that  time  as  government  property,  and  hence  con- 
traband. Therefore,  London  concluded,  the  Wil- 
helmina  must  be  stopped. 

To  meet  this  situation  the  attorney  for  the  W.  T. 
Green  Commission  Company  requested  the  German 
Ambassador  at  Washington  to  guarantee  that  the 
food  on  the  Wilhelmina  would  not  reach  the  military 
forces  of  Germany.  Count  von  Bernstorff  replied  as 
follows : 

"I,  as  representative  of  the  German  Government, 
guarantee  to  you  that  the  foodstuffs  will  not  reach 
the  German  Government,  its  agents  or  contractors, 
nor  the  military  and  naval  forces.  I  will  further 
take  the  necessary  steps  which  will  insure  that  the 
German  Government  will  not  make  use  of  its  right 
of  pre-emption. 

"I  shall  at  once  communicate  in  this  matter  with 
the  State  Department  and  advise  you  later." 


THE  WILHELMINA  CASE  63 

On  the  following  day,  January  29,  the  German 
Ambassador  communicated  this  guarantee  to  the 
State  Department  at  Washington,  on  behalf  of  his 
home  government. 

To  be  sure,  the  original  German  Decree  specifically 
stated:  "The  provisions  of  this  ordinance  do  not 
apply  to  grain  or  flour  imported  from  foreign  coun- 
tries." But  the  importer  had  to  operate  through  the 
War  Grain  Company,  the  Central  Purchasing  Com- 
pany, or  the  German  community  officials.  This  did 
not  mean  the  armed  forces  of  the  government  or  the 
government's  military  agents.  The  agencies  named 
were  created  to  direct  imported  grain  solely  into 
channels  of  private  consumption.  But  the  matter 
was  easily  misunderstood  abroad;  and  hence,  on 
February  5,  the  German  Federal  Council  rescinded 
the  requirement  for  the  importer  to  operate  through 
the  companies  or  the  community  officials,  and  the 
enactment  was  made  to  read  simply: 

"The  provisions  of  this  ordinance  do  not  apply 
to  grain  and  flour  which  are  imported  from  foreign 
countries." 

This  modification  of  the  German  Decree  was  made 
known  to  our  government  by  the  German  Govern- 
ment in  a  note  never  published  in  full  but  quoted  in 
part  in  ours  to  Great  Britain  of  February  15. 

In  England  the  German  Decree  was  taken  gener- 
ally as  a  confession  that  Germany  was  in  desperate 
straits.  And  if  the  supplies  of  food  in  Germany 
were,  in  truth,  running  short,  then  the  last  thing 


64     ECONOMIC  ASPECTS  OF  THE  WAR 

that  His  INIajcstj's  Government  wanted  was  to  see 
its  "economic  pressure"  relaxed.  The  censored  press 
despatches  from  London  daily  told  of  a  firmer  and 
firmer  intention  on  Britain's  part  to  stop  the  Wil- 
helmina.  A  reported  offer  of  the  American  Relief 
Commission  to  buy  the  cargo  of  the  Wilhelmina  was 
hailed  in  London  as  a  happy  solution  of  "the  Wilhel- 
mina incident,  which  threatens  to  arouse  the  resent- 
ment of  the  British  public."  The  offer  of  the  Relief 
Commission  was  finally  made,  and  rejected,  on  Feb- 
ruary 7.  The  president  of  the  W.  T.  Green  Com- 
mission Company  said  the  food  would  be  sold  at 
Hamburg  for  the  civilian  population,  and  in  no  other 
way. 

On  February  1  officials  of  the  British  Foreign 
Office  stated  to  the  press  that  they  were  unable  to 
understand  the  value  of  Ambassador  Bemstorff's 
guarantee  that  the  Wilhelmina's  cargo  would  not 
reach  the  German  military,  in  view  of  the  German 
Decree  placing  all  foodstuffs  under  government  con- 
trol. They  omitted  the  detail  that  imported  food- 
stuffs were  not  affected  by  the  Decree. 

The  German  Decree  was  apparently  the  excuse 
England  had  sought  for  putting  upon  a  formal  basis 
the  stoppage  of  food  for  Germany  which  had  been 
practiced  since  the  opening  of  the  war.  On  Febru- 
ary 2,  Ambassador  Page  cabled  our  State  Depart- 
ment that  the  British  fleet  had  been  ordered  to  con- 
sider grain  and  flour  for  Germany  as  contraband, 
subject  to  seizure  and  confiscation.  This  included 
the  cargo  of  the  Wilhelmina,  it  was  added,  but  as  a 


THE  WILHELMINA  CASE  65 

special  dispensation  this  particular  consignment, 
having  been  forwarded  before  the  confiscation  order, 
would  be  paid  for.  Other  seizures  would  be  without 
compensation. 

Meantime  the  Wilhelmina  was  nearing  the  Eng- 
lish Channel.  On  February  4  the  German  Govern- 
ment gave  forth  its  War  Zone  announcement — a 
warning  that  after  February  18  all  British  merchant 
vessels  found  in  the  waters  around  Great  Britain 
would  be  torpedoed,  without  regard  to  the  safety  of 
crews  or  passengers.  As  a  justification  of  this 
unprecedented  method  of  warfare,  it  was  declared 
that  England  was  attempting  to  starve  a  nation  of 
70,000,000  people  by  means  not  recognized  by  inter- 
national law.  Therefore  the  Germans  proposed  to 
use  what  means  they  could  to  shut  off  the  British 
food  supply. 

On  the  same  February  4,  the  British  Foreign 
Office  issued  a  statement  that  it  would  stop  the  Wil- 
helmina and  throw  her  cargo  into  a  prize  court. 
The  statement  said  that  under  the  Decree  of  Jan- 
uary 25  all  grain  imported  into  Germany  must  pass 
through  semi-official  hands.  Therefore  it  could  be 
considered  as  destined  to  the  government  and  hence 
contraband.  (No  attention  was  paid  to  Count  von 
Bemstorff's  guarantee  to  Washington  from  his  gov- 
ernment that  the  grain  would  reach  only  civilians.) 
If  the  cargo  were  seized,  the*  British  authorities  said 
they  would  pay  for  it,  and  they  would  pay  the  owners 
of  the  vessel  for  any  delay  caused  by  the  British 
action.     Finally,  the  statement  announced  that  be- 


66     ECONOMIC  ASPECTS  OF  THE  WAR 

cause  of  Germany's  intention  to  sink  merchant  ves- 
sels with  their  crews,  England  might  be  compelled  to 
"adopt  in  retaliation  more  stringent  measures 
against  German  trade." 

Also  on  February  4,  the  German  Ambassador  at 
Washington  further  complicated  the  case  by  for- 
mally suggesting  that  the  distribution  of  the  food 
of  the  Wilhelmina  should  be  supervised  by  American 
consular,  officers  in  Germany,  who  could  give  assur- 
ances that  none  of  it  would  get  into  the  hands  of 
armed  forces.  The  British  Embassy  intimated, 
according  to  Washington  despatches,  that  this 
would  not  be  acceptable.  Even  if  it  were  assured, 
the  Embassy  said,  that  the  imported  food  would 
reach  only  German  civilians,  that  would  make  it 
possible  for  the  military  to  live  on  the  home  supplies 
while  the  civilians  lived  on  imports. 

Reduced  to  the  last  extremity,  the  British  always 
fell  back  upon  the  contention  in  one  or  another 
form,  that  if  the  Wilhelmina  and  such  ships  got 
through  with  food  to  Germany,  this  would  frustrate 
the  starvation  plan. 

It  so  happened  that  the  Wilhelmina,  a  small 
steamer,  was  caught  in  severe  gales  on  the  North 
Atlantic,  and  on  February  9  put  in  at  Falmouth  for 
refuge.  Two  days  later,  the  British  authorities 
formally  seized  the  cargo. 

The  owners  of  the  goods  urged  thereupon  that 
by  the  most  extreme  constructions  of  international 
law  on  the  part  of  England,  that  country  was  not 
justified  in  seizing  more  than  the  grain  and  flour  on 


THE  WILHELMINA  CASE  67 

board  the  Wilhelmina,  for  only  these  articles  had 
been  included  in  Germany's  confiscation  Decree.  It 
was  claimed  that  the  ship  should  be  free  to  proceed  to 
Germany  after  the  British  had  taken  off  the  grain 
and  flour,  constituting  only  15  per  cent  of  a  cargo 
of  foodstuff^s. 

This  contention  was  communicated  to  the  British 
Government,  in  a  note  which  our  State  Department 
sent  to  Britain  on  February  15.  The  note  implied 
that  the  British  stoppage  of  the  cargo  because  of  the 
German  Decree  was  invalidated  by  the  modification 
of  that  Decree,  which  exempted  from  its  operation 
imported  foodstuffs.  A  communication  of  the  Ger- 
man Government  was  quoted,  citing  this  modification 
and  oflTering  to  allow  American  consular  officers  to 
supervise  the  distribution  of  such  imports  to  German 
civilians.  The  hope  was  expressed  that  unless  Brit- 
ain had  in  its  possession  facts  not  in  the  hands  of  the 
United  States,  the  Wilhelmina  might  be  allowed  to 
proceed. 

Before  the  British  answer  to  this  note  was  forth- 
coming, important  events  occurred  in  parliament. 
On  February  16,  the  day  after  our  note  was  sent, 
Winston  Churchill,  Lord  of  the  Admiralty,  an- 
nounced in  the  following  words  the  forthcoming 
"blockade"  of  Germany : 

"We  have  not  yet  stopped  the  importation  of  food 
into  Germany,  but  the  time  has  come  to  consider  the 
situation.  The  Allied  Governments  will  probably 
make  declaration  of  action,  the  eff^ect  of  which  will  be 
to  bring  the  full  pressure  of  the  English  naval  power 


68     ECONOMIC  ASPECTS  OF  THE  WAR 

to  bear   on   Germany.      The   pressure   of   the   navy 
itself  could  decide  the  issue  of  this  war." 

It  is  amazing  how  thoroughly  American  public 
opinion  was  misinformed  as  to  the  facts  of  the  case, 
and  how  generally  the  public  accepted  as  truth  the 
absurd  statement  of  Churchill  that  "we  have  not  yet 
stopped  the- 'importation  of  food  into  Germany  but 
the  time  'has  come  to  consider  the  situation,*'  And 
no  one  seemed  to  grasp  the  fact  that  foods  imported 
into  Germany  were  not  lawfully  subject  to  British 
seizure. 

Even  in  so  well-informed  a  paper  as  the  New  York 
Evening  Post  there  appeared  on  February  18  an 
editorial  which  ignored  the  basic  facts  that  England 
never  had  let  food  go  by,  and  that  the  German 
Decree  excluded  imported  food.     The  Post  said: 

"The  historic  British  position  has  been  that  food- 
stuffs not  destined  for  use  of  the  army  must  be 
allowed  to  pass.  That,  in  general,  has  been  the 
practice  of  the  English  cruisers  and  courts  during 
the  early  months  of  this  war.  But  now  that  Ger- 
many has  abolished  all  private  buying  and  selling 
of  foodstuffs  within  the  empire,  the  old  distinctions 
are  obliterated.  The  presumption  today  is  that  all 
foodstuffs  entering  Germany  are  for  military  use,  or 
may  be  immediately  requisitioned  for  military  use." 

On  February  19,  Sir  Edward  Grey  answered  our 
note  regarding  the  Wilhelmina.  He  said  that  the 
steamer  had  been  seized  after  the  German  Decree  of 
January  25.  He  added  that  the  February  6  modi- 
fication excepting  imported  foodstuffs  was  not  known 


THE  WILHELMINA  CASE  69 

to  Britain  at  the  time  of  the  Wilhelmina  seizure, 
and  declared  that  this  modification  had  just  become 
known.  A  prize  court  must  pass  on  the  question 
whether  the  modification  changed  the  status  of  the 
vessel. 

However,  he  continued,  there  were  other  grounds 
for  detaining  the  Wilhelmina.  The  Germans  had 
justified  the  bombarding  of  Hartlepool  and  Scar- 
borough on  the  ground  that  these  placed  were  forti- 
fied, or  were  serving  as  bases  for  military  operations. 
Therefore  England  might  stop  foodstuffs  for  Ham- 
burg on  the  ground  that  Hamburg  was  fortified  and 
that  food  so  destined  was,  according  to  the  Declara- 
tion of  London,  presumably  destined  to  miHtary 
forces.  "Hamburg  .  .  .  is  in  part  protected  by 
fortifications  at  the  mouth  of  the  Elbe"  and  is  "a 
fortified  town  and  a  base  of  operations  and  supply." 

The  owners  of  the  Wilhelmina's  cargo,  the  note 
observed,  would  have  a  right  to  establish  their  inno- 
cence, if  they  could,  in  a  British  prize  court.  It  was 
suggested  that  diplomatic  action  by  the  United 
States  be  avoided  until  full  advantage  had  been  taken 
of  the  appeal  to  the  courts. 

It  was  protested  further  that  Britain  had  not  yet 
interfered  with  food  moving  to  Germany: 

"His  Majesty's  Government  have  not,  so  far,  de- 
clared foodstuffs  to  be  absolute  contraband.  They 
have  not  interfered  with  any  neutral  vessels  on 
account  of  their  carrying  foodstuffs,  except  on  the 
basis  of  such  foodstuffs  being  liable  to  capture  If 
destined  for  the  enemy's  forces  or  government." 


70     ECONOMIC  ASPECTS  OF  THE  WAR 

Finally,  the  British  note  averred  that  Germany 
had  violated  international  law  by  bombarding  British 
coast  towns,  laying  mines,  mistreating  Belgians  and 
Frenchmen  and  torpedoing  British  merchant  vessels. 
Therefore  Britain  could  not  be  expected  to  remain 
bound  by  old  laws.  Neutrals  would  be  expected  to 
stand  aside  while  England  declared  food  contraband, 
or  adopted  such  other  measures  of  retaliation  as 
should  be  thought  fitting. 

It  is  impossible  to  pass  over  this  note  without 
commenting  upon  certain  of  its  features.  For 
example,  Sir  Edward  Grey  informed  us  that  Eng- 
land did  not  know  of  the  modification  of  the  German 
Decree  w^hen  the  Wilhelmina  was  seized  on  February 
9.  That  modification  passed  the  Bundesrat  on  Feb- 
ruary 6.  The  news  was  cabled  to  the  United  States 
via  London.  At  the  head  of  tliis  despatch  to  Ameri- 
can papers,  published  February  8,  we  read,  "Berlin, 
February  6;  via  London,  February  7."  This  means 
that  on  February  7  this  important  news  passed 
through  the  hands  of  the  British  censor.  That  it 
was  not  known  to  the  Foreign  Office  on  February  9 
was,  to  say  the  least,  extraordinary. 

The  fortifications  by  which  Hamburg  is  "pro- 
tected" are  at  the  mouth  of  the  Elbe,  over  seventy- 
five  miles  from  the  port.  Hamburg  is  fortified  about 
to  the  same  extent  as  Albany  is  fortified  by  the  pro- 
tections about  New  York  City,  and  on  such  a  theory, 
Peekskill,  Tarrytown  and  Yonkers  are  military 
establishments  far  more  perilous. 


THE  WILHELMINA  CASE  71 

The  British  statement  that  it  "might  be  obliged" 
to  consider  interfering  with  food  moving  to  Ger- 
many needs  no  comment. 

It  is  necessary  to  say  a  word  about  Britain's  con- 
tention that  it  should  have  a  free  hand  because  Ger- 
many was  overstepping  international  morality  in  its 
manner  of  making  war  on  England.  That  of  course 
is  no  excuse  for  England  taking  action  against  Ger- 
many wliich  violates  the  rights  of  neutrals.  ^  When 
Germany's  novel  conception  of  international  law 
infringes  upon  our  rights,  we  protest  and  takef  care 
of  ourselves.  We  do  not  invite  or  allow  England  to 
defend  us  against  Germany's  aggressions  any  more 
than  we  allow  Germany  to  defend  us  against  Eng- 
land's aggressions.  Once  admit  this  altruistic  policy 
of  reprisals  by  belligerents  and  all  our  neutral  rights 
vanish. 

It  was  evident,  however,  from  the  developments  in 
the  Wilhelmina  case,  that  no  criticisms  were  likely 
to  change  the  course  of  events  or  to  alter  the  deter- 
mined  policy  of  His  Majesty's  Government. 

On  February  27,  the  writ  was  issued  putting  the 
Wilhelmina's  cargo  into  the  prize  court.  The 
attorneys  for  the  cargo,  who  were  in  London,  hoped 
for  a  speedy  trial.  They  expected  that  the  vessel 
would  get  to  Hamburg,  for  the  "blockade"  of  Ger- 
many was  not  announced  until  March  1,  three  weeks 
after  the  Wilhelmina  was  detained.  On  March  19, 
and  again  on  March  23,  the  American  attorneys  in 
New  York  and  London  protested  against  the  delay 
in  trying  the  case  in  the  prize  court. 


72     ECONOMIC  ASPECTS  OF  THE  WAR 

On  March  26  the  British  Solicitor  of  the  Treasury 
suggested  to  the  attorney  of  the  vessel  that  in  view 
of  the  loss  of  $1,000  per  day  as  a  result  of  the  deten- 
tion, the  cargo  should  be  unloaded,  and  that  such 
part  of  the  merchandise  as  was  deteriorating  should 
be  sold  through  the  prize  court.  The  suggestion 
was  refused  on  the  ground  that  the  parties  who  had 
chartered  the  vessel  preferred  to  keep  the  cargo 
aboard,  ready  to  sail  for  Hamburg  when  the  prize 
court  declared  it  free. 

The  Wilhelmina  case  was  finally  set  for  March  31. 
It  was  evident,  however,  that  the  English  ministry 
did  not  want  the  case  to  come  before  the  prize  court ; 
and  the  reason  for  their  attitude  becomes  clear  after 
a  httle  reflection.  As  shown  in  the  previous  chapter, 
Great  Britain  as  a  neutral  has  constantly  denied 
that  foodstuffs  destined  for  civilians  in  a  belligerent 
country  are  seizable  as  contraband.  Any  action  of 
a  prize  court  condemning  the  cargo  of  the  Wilhel- 
mina would  have  been  an  absolute  reversal  of  this 
attitude  by  her  judiciary  and  would  have  promised 
a  very  possible  future  embarrassment.  The  vessel 
could  not  be  held  on  any  charge  of  attempted  block- 
ade-running, for  it  had  sailed  and  had  been  detained 
before  the  blockade  was  declared.  Yet  it  was  not 
safe  to  let  America  get  a  food  ship  through  to  Ger- 
many. More  might  follow  if  such  a  precedent  were 
estabhshed. 

The  problem  was  solved  by  the  familiar  British 
method  of  a  new  Order  in  Council,  which,  if  it  cannot 
be  called  a  substitute  for  international  law,  served 


THE  WILHELMINA  CASE  73 

at  least  to  give  a  legal  formula  to  what  was  done. 
This  Order  was  passed  on  March  23,  but  was  not 
divulged  until  the  trial,  on  March  31.  Then,  to  the 
surprise  of  the  American  attorneys,  the  crown  law- 
yers produced  an  Order  in  Council  which  authorized 
the  crown  to  requisition  any  neutral  ship  and  cargo 
which  for  any  reason  whatever  had  been  brought 
before  the  prize  court.    The  new  Order  read : 

"Where  it  is  made  to  appear  to  the  judge,  on  the 
application  of  the  proper  officers  of  the  court,  that 
it  is  desired  to  requisition  on  behalf  of  His  Majesty 
a  ship  in  respect  of  which  no  final  decree  of  con- 
demnation has  been  made,  he  shall  order -that  the  ship 
shall  be  appraised,  and  that,  upon  an  undertaking 
being  given  in  accordance  with  rule  5  of  this  Order, 
the  ship  shall  be  released  and  delivered  to  the 
crown." 

The  counsel  for  the  Wilhelmlna's  cargo  were  taken 
aback,  and  asked  for  a  continuation  of  the  case  until 
April  13,  so  that  they  could  revise  their  argument 
to  meet  the  new  law  that  was  to  apply.  They  found 
there  was  no  argument.  The  power  of  Britain, 
under  her  self-made  international  law,  to  requisition 
the  cargo  of  the  Wilhelmina,  made  a  trial  of  that 
cargo's  right  to  proceed  to  Germany  practically  out 
of  the  question. 

The  American  shippers  were  therefore  compelled 
to  submit  to  the  purchase  of  the  goods  by  the  British 
government.  The  offer  was  made  by  Great  Britain 
in  a  note  to  Ambassador  Page,  published  April  13, 
to  be  transmitted  to   the  W.   T.   Green   Company. 


74     ECONOMIC  ASPECTS  OF  THE  WAR 

The  British  note  stated  that  the  sailing  of  the  Wil- 
helmina  was  designed  as  a  test  case  to  see  whether 
American  food  could  be  sent  to  Germany.  Since  the 
Blockade  Order,  however,  the  case  was  academic. 
That  Order  would  prevent  any  more  food  being  sent, 
no  matter  how  the  case  of  the  Wilhelmina  might  be 
decided.  Hence  there  was  no  longer  any  object  in 
continuing  the  proceedings.  The  British  Govern- 
ment therefore  offered  to  buy  the  cargo  at  Hamburg 
prices,  the  compensation  to  be  determined  by  a 
referee  appointed  by  Sir  Edward  Grey  and  Ambas- 
sador Page.  As  to  the  vessel  itself.  Great  Britain 
offered  to  compensate  for  loss  due  to  the  detention 
so  far  as  that  was  caused  by  the  action  of  the  British 
authorities ;  but  it  had  been  contended  by  London 
from  the  first  that  the  ship  might  have  discharged 
cargo  and  proceeded  immediately  after  February  9. 
Lord  Mersey  was  appointed  referee.  Early  in 
May,  London  despatches  reported  that  he  had  de- 
creed $430,000  as  a  settlement  for  the  Wilhelmina 
case.  The  London  Daily  Mail  quoted  the  Wilhel- 
mina owners  as  "highly  pleased  with  the  handsome 
and  generous  settlement  made  by  the  government 
for  the  steamship's  cargo."  The  W.  T.  Green  Com- 
mission Company,  through  their  lawyers,  deny  any 
such  satisfaction.  The  profit  on  that  one  $200,000 
cargo  was  large,  but  in  their  attempt  to  re-establish 
their  German  business  they  had  failed.  Had  they 
succeeded,  they  would  have  made  a  large  profit  not 
on  one,  but  on  a  hundred  cargoes. 


THE  WILHELMINA  CASE  75 

Neither  they  nor  the  country  was  satisfied  by  this 
single  "handsome  and  generous  settlement"  for  the 
enforced  surrender  of  our  neutral  rights  and  inter- 
ests. 


CHAPTER  V 

The  Blockade 

Shortly  before  the  arrival  of  the  British  Govern- 
ment's note  of  February  10,  containing  the  final 
reply  to  our  protest  of  December  26,  the  situation 
with  respect  to  our  export  trade,  and  especially  as  to 
the  question  of  foodstuffs  for  Germany,  had  been 
given  a  new  phase  by  the  appearance  of  Germany's 
War  Zone  announcement.  The  British  February  10 
note  was  a  communication  of  no  epoch-making  bril- 
liancy. Its  most  striking  feature  was  the  delicate 
irony,  already  remarked,  with  which  Sir  Edward  Grey 
informed  the  American  public  that  the  Order  in  Coun- 
cil of  October  29  was  an  amelioration  of  the  severe 
conditions  of  the  August  20  Order. 

The  authorities  at  London,  it  appeared  in  this 
February  note,  were  considering  whether  they  should 
not  regard  all  food  for  Germany  as  absolute  contra- 
band,* because  of  the  alleged  identity  of  the  civil 
and  miHtary  population  of  that  country.  And  in 
view  of  the  recent  War  Zone  proclamation  from 
Berlin,  it  was  intimated  that  still  stricter  measures 
might  be  necessary  to  protect  the  interests  of  Great 

*  Grain  and  flour  were  already  so  considered.  On  February 
Q  Ambassador  Page  cabled  from  London  that  the  British  navy 
had  been  instructed  to  treat  these  commodities  as  absolute 
contraband. 


THE  BLOCKADE  77 

Britain.  Thus  the  note  furnished  a  record  of  the 
ending  of  one  episode  and  the  beginning  of  another, 
and  for  purely  historical  purposes  it  had  a  certain 
value;  but  as  to  meeting  the  causes  of  the  complaint 
in  our  December  note,  or  the  question  of  their 
removal,  it  contributed  nothing. 

Germany's  War  Zone  Decree,  growing  out  of  the 
actions  of  Great  Britain  in  obstructing  food  supplies, 
had  been  issued  by  the  German  Admiralty  on  Febru- 
ary 4.  It  was  a  warning  addressed  to  the  commer- 
cial world,  stating  that  from  February  18 — two 
weeks  after  the  issuance  of  the  warning — the  waters 
around  Great  Britain,  including  the  whole  of  the 
English  Channel,  would  be  a  danger  zone.  In  this 
area,  it  was  announced,  all  British  merchant  vessels 
caught  by  the  German  submarines  would  be  destroyed 
without  obligation  respecting  the  safety  of  crews  or 
passengers,  and  neutral  vessels  would  be  in  danger. 
In  explanation  of  the  latter  portion  of  the  Decree, 
reference  was  made  to  a  secret  order  of  the  British 
Admiralty  authorizing  the  vessels  of  that  country 
to  use  neutral  flags  to  deceive  German  submarines. 
In  a  separate  statement  the  German  Chancellor  de- 
clared that  neutrals  were  not  protecting  their  rights 
to  trade  with  Germany,  and  that  the  Germans  could 
not  sit  still  and  die  of  famine  but  must  retaliate  with 
the  same  weapons  that  England  used. 

The  danger  to  our  interests  involved  in  this  note 
was  quickly  recognized  at  Washington.  Our  answer 
was  dated  February  10.  It  reminded  the  Germans 
that  the  prerogatives  of  belligerent  war  vessels,  with 


78     ECONOMIC  ASPECTS  OF  THE  WAR 

respect  to  neutral  shipping,  were  limited  to  the  right 
of  visit  and  search.  Our  government  denied  that  the 
United  States  had  been  unneutral  in  failing  to  pro- 
test against  violations  of  its  neutral  rights.  We 
denied  that  the  British  misuse  of  our  flag  cast  a  sus- 
picion on  all  neutral  shipping  warranting  its  destruc- 
tion. Should  a  German  commander  destroy  on  the 
high  seas  an  American  vessel  and  the  lives  of  Ameri- 
can citizens,  it  was  added,  we  should  hold  Germany 
to  a  strict  accountabilit3\  Finally,  we  stated  for 
Berlin's  information  that  we  had  made  representa- 
tions to  Britain  against  using  our  flag  indiscrimi- 
nately to  protect  its  vessels. 

Regarding  our  brief  correspondence  with  England 
as  to  the  use  of  the  American  flag  on  British  vessels, 
it  may  be  noted  merely  that  Great  Britain's  reply 
to  our  communication  was  not  responsive.  The  same 
must  be  said  of  the  German  reply  of  February  16  to 
our  protest  against  the  War  Zone  Decree.  Ger- 
many declared  that  she  had  abided  by  the  Declara- 
tion of  London,  as  suggested  by  America  early  in 
the  war,  and  had  even  let  food  ships  go  from  Den- 
mark to  England,  though  her  warships  could  have 
stopped  such  trade  any  time.  In  the  meantime 
England  had  torn  up  the  Declaration  of  London  and 
was  trying  to  starve  her  opponent.  Neutrals  had 
protested,  Germany  said,  but  without  avail. 

Since  neutrals — the  note  continued — had  merely 
protested,  and  had  taken  no  action  when  England 
was  abridging  their  right  to  trade  with  Germany,  it 
was  now  expected  that  they  would  show  no  less  toler- 


THE  BLOCKADE  79 

ance  to  Germany.  It  was  stated  that  both  mines 
and  submarines  would  make  the  War  Zone  unsafe. 
The  best  thing  for  neutrals  would  be  to  avoid  the 
Zone;  or  for  neutral  merchant  ships  to  be  convoyed 
b}?^  neutral  war  vessels.  Danger  to  neutral  merchant 
vessels  was  doubled  by  the  British  insistence  on  the 
right  to  adopt  neutral  flags,  Germany  declared. 

We  were  given,  further,  the  well-worn  assurance 
that  Germany  was  fighting  for  her  life.  Finally — 
the  hopeful  thing  about  the  note — Germany  implied 
that  she  would  give  up  her  submarine  warfare  if  Eng- 
land would  abandon  her  unlawful  attempt  at  starva- 
tion, and  would  allow  foodstuffs  and  raw  materials 
to  move  into  Germany  without  interference.  On  the 
following  day,  February  17,  the  German  Embassy 
at  Washington,  as  already  noted  in  connection  with 
the  Wilhelmina  case,  made  the  statement  that  the 
German  Government  would  consent  to  have  American 
consular  officers  supervise  the  distribution  to  civiHans 
of  foodstuffs  imported  from  America. 

The  American  Government  believed  it  saw  in  the 
German  proposal  the  basis  for  a  successful  negotia- 
tion with  both  belligerents  with  regard  to  the  rights 
of  neutrals.  It  saw  the  possibility  of  recalling  the 
belligerents  to  the  limits  of  international  law,  as  that 
law  was  known  before  the  opening  of  the  war.  We 
had  suffered  through  the  British  interference  with 
our  exports  to  Germany  and  adjacent  neutrals. 
Still  greater  loss  threatened  us  from  the  blockade 
that  Britain  was  obviously  about  to  declare.  We 
had  reason  to  fear  serious  consequences  from  the  pro- 


80     ECONOMIC  ASPECTS  OF  THE  WAR 

spective  submarine  warfare  of  Germany.  It  was  to 
the  interest  of  all  neutrals  to  have  these  evils  averted, 
along  with  other  practices,  in  violation  of  inter- 
national law,  which  had  grown  up  in  the  course  of 
the  struggle,  such  as  the  laying  of  floating  mines  on 
the  high  seas. 

Therefore,  we  sent  Germany  and  England  an 
identical  note,  dated  February  20,  containing  cer- 
tain suggestions.  Both  nations  were  to  cease  the  use 
of  all  mines  on  the  high  seas.  Floating  mines  were 
to  be  discontinued.  Anchored  contact  mines,  used 
defensively,  and  not  out  beyond  the  cannon  range  of 
harbors,  were  to  be  constructed  with  the  stamp  of 
the  government  that  made  them  and  were  to  be  so 
constructed  as  to  be  harmless  if  they  went  adrift. 

Submarines  were  to  be  used  against  merchant 
ships  only  for  the  purpose  of  exercising  the  right  to 
visit  and  search. 

Great  Britain  was  to  desist  from  its  interference 
with  the  movement  of  foodstuffs  into  Germany. 
Foodstuffs  to  Germany  from  the  United  States  or 
other  neutrals  were  to  be  consigned  to  agencies  desig- 
nated by  the  United  States  Government,  and  the 
German  Government  was  to  undertake  not  to  requisi- 
tion such  supplies. 

Nearly  a  month  passed  before  this  note  was 
answered.  The  German  answer  was  dated  March  1. 
It  accepted  the  American  proposition  in  principle 
and  in  most  of  its  details.  Germany  agreed  to  cease 
the  use  of  floating  mines,  and  to  construct  anchored 
mines  only  as  indicated,  though  not  consenting  to 


THE  BLOCKADE  81 

forego  wholly  the  use  of  anchored  mines  for  offensive 
purposes.  Submarines  were  to  be  used  in  accordance 
with  the  recognized  rules  of  international  law.  But 
these  concessions  were  dependent  upon  reciprocal 
conduct  by  Great  Britain,  the  note  apparently  de- 
manding that  Germany  should  be  allowed  to  receive 
not  only  foodstuffs  but  also  other  goods  on  the  free 
list  and  conditional  contraband  list  of  the  Declara- 
tion of  London.  Moreover,  British  merchant  vessels 
must  engage  not  to  go  armed  or  to  resist  search  by 
the  submarines,  and  must  cease  the  deceptive  use  of 
neutral  flags. 

In  contrast  to  this  attitude.  Great  Britain,  on 
March  15 — after  the  announcement  of  that  country's 
blockade  policy — sent  us  a  flat  rejection  of  our  pro- 
posal.   First,  the  British  note  stated  that 

"The  reply  of  the  German  Government  .  .  .  has 
been  published  and  it  is  not  understood  that  the 
German  Government  is  prepared  to  abandon  the 
practice  of  sinking  British  merchant  vessels  by  sub- 
marines. ..." 

The  note  then  referred  to  the  doubts  expressed  by 
Germany  of  the  feasibility  of  foregoing  the  use  of 
anchored  mines  on  the  high  seas  for  offensive  pur- 
poses. It  was  denied  that  so  far  the  British  forces, 
"either  naval  or  military,  can  have  laid  to  their 
charge  any  improper  proceedings." 

Then  followed  a  recital  of  alleged  German  illegal 
acts  in  the  war :  the  treatment  of  civilians  in  Belgium 
and  France  and  of  British  prisoners  in  Germany; 


82     ECONOMIC  ASPECTS  OF  THE  WAR 

the  laying  of  mines  on  the  high  seas ;  the  sinking  of 
food  vessels  like  the  Frye,  destined  for  Britain;  the 
bombardment  from  the  sea  of  British  coast  towns 
and  the  dropping  of  bombs  from  air  craft  on  unforti- 
fied places;  and  the  sinking  of  British  merchant 
vessels  by  torpedoes  without  warning. 

The  British  note  then  stated  that  considerations 
of  humanity  regarding  food  for  the  civilian  popula- 
tion of  a  belligerent  were  inoperative  when  that  bel- 
ligerent was  blockaded.  Apart  from  Great  Britain's 
rights  due  to  the  blockade,  it  continued,  such  Ger- 
man authorities  as  Bismarck  and  Caprivi  had  stated, 
in  contradiction  to  the  British  and  American  atti- 
tude, that  pressure  on  a  civil  population  was  a  proper 
means  to  bring  war  to  an  end. 

Moreover,  there  was  a  blockade,  the  note  added, 
"effectively  controlling  by  cruiser  'cordon'  all  pas- 
sage to  and  from  Germany  by  sea." 

Again  a  few  words  of  comment.  Sir  Edward  Grey 
held  that  the  published  German  note  did  not  propose 
to  stop  the  sinking  of  British  merchant  vessels  by 
submarines.  What  the  German  note  had  said,  six 
days  before — and  Sir  Edward  Grey  could  not  have 
been  ignorant  of  it — was  this : 

"The  German  Government  would  undertake  not  to 
use  their  submarines  to  attack  mercantile  (vessels) 
of  any  flag,  except  when  necessary  to  enforce  the 
right  of  visit  and  search.  Should  the  enemy  nation- 
ality of  the  vessel  or  the  presence  of  contraband  be 
ascertained,  the  submarine  would  proceed  in  accord- 
ance with  the  general  rules  of  international  law." 


THE  BLOCKADE  83 

As  for  mines  on  the  high  seas,  both  belligerents  had 
used  them,  and  America  had  not  protested.  With 
one  exception  Germany  in  her  note  offered  to  forego 
using  such  mines,  and  that  exception  might  have  been 
eliminated  by  negotiation. 

As  for  the  atrocity  charges,  they  were  matched  by 
countercharges.  But  whatever  their  merits,  they 
were  entirely  beside  the  point.  And  further,  we  had 
no  interest  in  what  Bismarck  wrote  to  the  Kiel  Cham- 
ber of  Commerce  or  what  Caprivi  said  in  the  Reich- 
stag. Our  conception  of  the  rights  of  the  civilian 
population  of  a  belligerent  to  buy  food  from  us 
coincided  with  the  view  that  Britain  had  enforced 
when  she  was  a  neutral,  with  our  own  previous  posi- 
tion, and  with  the  view  of  civilized  nations  as  set 
down  in  the  Declaration  of  London.  As  to  the 
blockade,  the  situation  to  which  Great  Britain  ap- 
plied that  tenn  was  not  a  blockade  in  any  proper 
conception,  and  everyone  knew  that  the  so-called 
cordon  was  not  "controlling  all  passage  to  and  from 
Germany  b}^  sea."  All  this  was  made  clear  to  Britain 
in  our  note  of  March  30. 

The  blockade  had  been  originated  two  weeks  before 
Great  Britain  delivered  this  answer  to  our  note.  It 
was  not  originally  called  a  blockade,  but  a  measure 
to  stop  all  movement  of  goods  to  or  from  Germany, 
or  virtually  an  application  of  the  law  of  contraband 
to  all  forms  of  merchandise,  not  only  to  goods  moving 
to  Germany  but  also  to  those  leaving  Germany.  By 
a  coincidence  the  British  announcement  of  this  meas- 
ure bore  the  same  date — March  1 — as  the  German 


84     ECONOMIC  ASPECTS  OF  THE  WAR 

acceptance  of  our  suggestion  made  jointly  to  the 
belligerents  to  modify  their  war  on  neutral  trade. 

So  on  March  1  the  blockade  came  into  sight.  On 
that  date  Sir  Cecil  Spring-Rice  handed  our  Secretary 
of  State  a  memorandum  referring  to  the  German 
submarine  warfare,  and  announcing  Great  Britain's 
proposal  for  retaliation  as  follows: 

"Her  (Germany's)  opponents  are  therefore  driven 
to  frame  retaliatory  measures  in  order  in  their  turn 
to  prevent  commodities  of  any  kind  from  reaching  or 
leaving  Germany.  The  British  and  French  Govern- 
ments will  therefore  hold  themselves  free  to  detain 
and  take  into  port  ships  carrying  goods  of  presumed 
enemy  destination,  ownership  and  origin.  It  is  not 
intended  to  confiscate  such  vessels  or  cargoes  unless 
they  would  otherwise  be  liable  to  condemnation." 

In  the  memorandum  the  word  blockade  was  not 
used.  On  March  5  our  State  Department  sent  an 
answer  to  the  communication.  Our  answer  was  less 
a  protest  than  an  inquiry  as  to  the  meaning  of 
Spring-Rice's  note.  It  was  urged  that  Great  Britain 
could  not  lawfully  detain  all  vessels  destined  for  Ger- 
many, except  in  the  case  of  a  blockade.  If  there  was 
none,  neutral  ships  should  not  be  detained  unless 
carrying  contraband.  We  asked  the  British  authori- 
ties whether  they  considered  that  a  blockade  existed 
or  not.  If  there  was  none,  how  could  Great  Britain 
detain  any  goods  from  Germany  to  us  on  neutral 
ships?  We  admitted  that  the  old-time  "close-in" 
blockade  might  be  impracticable  by  reason  of  the 
enemy's  use  of  submarines  and  air  craft  but  held 
that  Great  Britain  should  state  some  limit  to  the 


THE  BLOCKADE  85 

radius  of  blockading  activity  and  not,  for  example, 
seize  ships  with  German  cargo  when  nearino-  New 
York. 

London  answered  in  a  note  of  March  15,  the  same 
date  on  which  she  rejected  our  proposition  that  both 
she  and  Germany  return  to  international  law.  Our 
attention  was  directed  to  the  March  11  Order  in 
Council,  enclosed  with  the  March  15  note,  this  Order 
giving  effect  to  the  blockade  poHcy  announced  in  the 
Spring-Rice  notification  on  March  1.  The  note 
further  explained  that  Britain  would  interfere  with 
no  cargoes  outside  of  European  and  Mediterranean 
waters.  It  was  added  that  there  would  be  no  confis- 
cating of  neutral  cargoes  for  trying  to  pass  the 
blockade,  out  of  consideration  for  neutrals.* 

As  the  March  11  Order  in  Council  provided  the 
substitute  for  international  law  under  which  neutral 
countries  have  carried  on  up  to  the  time  of  this  writ- 
ing a  sort  of  business  with  each  other,  and  under 
which  they  are  stopped  from  trading  with  Germany, 
the  document  must  be  considered  with  some  care. 

It  began  by  stating  its  purpose  as  a  reprisal  on  the 
part  of  Britain  and  its  Allies.  No  vessels  sailing  to 
Germany  after  the  first  of  March,  it  declared,  would 
be  allowed  to  proceed  to  a  German  port.  Unless  such 
a  vessel  received  a  pass  to  proceed  to  some  neutral 
or  Allied  port,  the  cargo  must  be  discharged  In  a 

*  However,  neutral  cargoes  for  Germany  were  to  be  con- 
fiscated if  they  consisted  of  anything  on  the  swollen  British 
contraband  lists.  That  is,  shipments  to  Germany  were  treated 
under  the  provisions  of  the  October  29  Order  in  Council. 


86     ECONOMIC  ASPECTS  OF  THE  WAR 

British  port  and  turned  over  to  the  marshal  of  the 
prize  court.  If  the  goods  were  not  contraband  of 
war,  and  were  not  requisitioned  for  the  use  of  His 
Majesty,  they  should  be  restored  by  the  prize  court, 
on  such  terms  as  wei-e  deemed  just,  to  the  persons 
concerned. 

Any  vessel  sailing  after  March  1  for  a  neutral 
European  port,  having  aboard  goods  of  German 
ownership  or  destination,  might  be  required  to  dis- 
charge such  goods  in  a  British  or  Allied  port.  After 
being  discharged  in  a  British  port,  if  neither  contra- 
band nor  requisitioned  by  His  Majesty's  Government, 
they  should  "be  restored  by  order  of  the  court,  upon 
such  terms  as  the  court  may  in  the  circumstances 
deem  to  be  just,  to  the  person  entitled  thereto." 

The  Order  then  specified  how  a  neutral  might  pro- 
ceed to  get  justice  in  the  British  prize  court.  It 
stated  that  nothing  wliich  it  contained  should  be 
deemed  to  affect  the  liability  of  any  vessel  or  goods 
"to  capture  or  condemnation  independently  of  this 
Order."  That  is,  the  Order  in  Council  of  October 
29  was  not  repealed. 

Finally,  the  last  and  most  novel  paragraph  of  the 
British  Order  was  a  bid  for  the  support  of  neutral 
hations  in  facilitating  the  measures  thus  taken 
against  Germany.  This  paragraph  offered  to  relax 
the  interference  of  Britain  with  commerce  between 
America  and  European  neutrals,  if  the  European 
neutrals  would  persuade  or  force  the  steamship  lines 
under  their  flags  not  to  carry  goods  of  German 
ownership  or  origin.     The  provision  read  as  follows: 


THE  BLOCKADE  87 

"^Nothing  in  this  Order  shall  prevent  the  relaxa- 
tion of  the  provisions  of  this  Order  in  respect  of  the 
merchant  vessels  of  any  country  which  declares  that 
no  commerce  intended  for  or  originating  in  Germany 
or  belonging  to  German  subjects  shall  enjoy  the  pro- 
tection of  its  flag." 

Referring  to  this  March  11  Order  in  Council,  the 
British  note  which  accompanied  it  reassured  our 
Ambassador  in  these  words : 

"I  apprehend  that  the  perplexities  to  which  your 
Excellency  refers  will  for  the  most  part  be  dissipated 
by  the  perusal  of  this  document." 

Far  from  "dissipating"  American  perplexities, 
the  March  Order  in  Council,  like  those  that  had 
gone  before,  infinitely  increased  them. 

Our  protest  was  voiced  in  our  note  to  Britain  of 
March  30.  We  said  in  this  communication  that  the 
Order  in  Council  of  March  11  would  constitute  a 
practical  assertion  of  unlimited  belligerent  rights 
over  neutral  commerce,  and  an  almost  unqualified 
denial  of  sovereign  rights  of  nations  at  peace.  Bel- 
ligerent rights  over  neutral  commerce,  we  urged,  are 
limited.  The  belHgerent  has  the  right  to  visit  and 
search  these  vessels,  and  to  capture  and  condemn 
them  if  it  is  found  that  they  are  on  unneutral  ser- 
vice or  carrying  contraband  of  war.  The  belligerent 
may  blockade  the  enemy's  ports  and  coast,  and  cap- 
ture and  condemn  any  vessel  trying  to  break  the 
blockade.  It  was  even  conceded  that  a  belligerent 
may  take  into  its  ports  for  examination  suspected 


88     ECONOMIC  ASPECTS  OF  THE  WAR 

vessels  engaged  in  trade  between  neutrals. — But  this, 
it  was  claimed,  is  the  end  of  the  rights  of  belligerents 
over  neutral  commerce. 

Moreover,  even  though  a  blockade  should  exist,  all 
but  absolute  contraband  shipments,  it  was  main- 
tained, might  be  freely  transported  from  the  United 
States  to  Germany,  through  neutral  countries.  For 
the  United  States  to  forego  this  right  would  he  in- 
consistent with  the  solemn  obligations  of  our  govern- 
ment^ and  would  he  assuming  an  attitude  of  unneun 
trality  towards  Germany. 

We  protested  against  the  announced  blockade  as 
including  not  only  all  the  coast  and  ports  of  Ger- 
many, but  also  a  great  number  of  neutral  ports.  No 
matter  if  the  "close"  blockade  could  no  longer  be 
maintained,  international  law  could  still  be  followed. 
Ships  should  be  allowed  free  passage  through  the 
blockading  cordon,  if  destined  to  neutral  ports. 
Absolute  freedom  from  interference  should  be  ac- 
corded to  all  trade  from  neutral  ports  to  America, 
and  to  all  trade  from  America  to  neutral  ports 
excepting  in  absolute  contraband  in  transit  to  the 
enemy. 

We  denied  that,  whatever  might  be  the  illegal  acts 
of  Germany  in  the  present  w  ar,  there  was  any  excuse 
for  similar  action  on  Great  Britain's  part,  so  far  as 
such  action  affected  neutral  rights. 

Our  note  called  attention  to  the  fact  that  Scandi- 
navian and  Danish  ports  could  trade  over  the  high 
seas  with  German  Baltic  ports,  access  to  which 
Great  Britain   could  not  bar.     We  pointed  out  the 


THE  BLOCKADE  89 

serious  interruption  of  American  trade  that  might 
result  from  the  enforcement  of  the  Order  In  Council. 
We  counted  on  Great  Britain  to  modify  Its  severity^ 
and  we  reserved  the  right  to  exact  reparation  for 
every  act  of  that  country  in  contravention  of  inter- 
national law. 

The  issue  between  London  and  Washington  was 
thus  sharply  drawn.  Wc  contended  for  the  freedom 
of  commerce,  for  equal  sovereignty  with  Britain  on 
the  high  seas  with  the  exception  of  certain  rights 
which  a  belligerent  might  exercise  under  inter- 
national law. 

Great  Britain  delayed  until  July  23  Its  answer  to 
the  March  30  note,  and  then  made  no  concession  to 
our  demands. 

This  July  23  communication  contended  that  the 
British  blockade  measures  were  reasonable,  necessary 
and  "adaptations"  of  the  old  principles  of  blockade. 
In  view  of  the  shocking  methods  of  German  warfare, 
it  continued,  the  AlHes  felt  the  obligation  to  take 
every  means  In  their  power  to  overcome  their  common 
enemy.  Further,  the  British  understanding  of  our 
March  30  note  was  that  we  admitted  the  necessity  of 
Britain  taking  all  steps  to  cripple  the  enemy's  trade, 
though  we  criticised  the  methods  employed. 

It  was  insisted  that  the  blockade  would  be  ineffect- 
ive if  not  extended  to  enemy  commerce  moving  via 
neutral  ports.  It  was  denied  that  the  United  States 
could  expect  Britain  to  make  such  a  modification  of 
Its  blockade  practices.  The  Bermuda  cases  of  Civil 
War  time  (reviewed  in  Chapter  IX)   were  cited  as 


90     ECONOMIC  ASPECTS  OF  THE  WAR 

illustrating  an  extensive  application  of  the  law  of 
blockade  by  the  United  States  itself.*  It  was  insisted 
that  England  had  the  right  to  extend  the  law  of 
blockade  to  fit  the  peculiar  situation  of  Germany, 
surrounded  and  served  as  it  was  by  neutral  ports. 
The  sole  obligation  of  Britain  in  the  matter  was  said 
to  be  the  obligation  not  to  molest  bona  fide  neutral 
trade.  The  reason  why  the  British  action  was  not 
directly  supported  by  written  authority  was,  it  was 
declared,  because  it  was  the  business  of  writers  on 
international  law  to  formulate  existing  rules  and  not 
suggest  adaptations  to  meet  altered  circumstances. 

The  note  insisted  that  the  British  adaptations  of 
old  rules  were  in  accordance  with  the  general  princi- 
ples of  law  and  that  "unnecessary  injury  to  neutrals" 
was  being  avoided.  It  was  asserted  that  our  March 
30  note  exaggerated  the  degree  of  British  interfer- 
ence with  our  trade  with  neutrals.  It  was  denied  that 
there  are  "certain  now  clearly  determined  rights"  of 
belligerents  which  belligerents  may  not  overstep. 
These  rights  were  stated  to  have  been  variously 
exercised  in  the  past.  The  method  of  exercising 
the  right  of  blockade,  the  note  went  on,  might  vary 
with  the  circumstances  of  the  case.  The  right  itself 
was  by  effective  means  to  shut  off  the  commerce  of  an 
enemy.  So  with  the  principle  of  contraband  and  its 
applications,  which  must  change  to  meet  conditions. 

*In  this  July  23  note,  England  did  not  again  (as  in  its 
February  10  note)  cite  the  Matamoros  cases,  the  real  Civil  War 
parallels  to  the  British  blockade  situation.  As  we  shall  see, 
these  cases  are  directly  opposed  to  the  British  contention. 


THE  BLOCKADE  91 

As  for  the  reminder  in  the  March  30  note  that 
according  to  the  Declaration  of  Paris  "free  ships 
make  free  goods,"  the  British  reply  said  that  Eng- 
land was  interfering  with  goods  because  of  German 
destination  or  origin,  not  because  of  German  owner- 
ship (which  according  to  the  Declaration  of  Paris 
was  insufficient  to  justify  seizure). 

His  Majesty's  Government  then  expressed  its  satis- 
faction that  the  measures  being  enforced  had  had 
no  detrimental  effect  on  the  commerce  of  the  United 
States. 

"Figures  of  recent  months  show  that  the  increased 
opportunities  afforded  by  the  war  for  American  com- 
merce have  more  than  compensated  for  the  loss  of 
the  German  and  Austrian  markets." 

The  note  was  a  clear  rejection  of  all  our  demands. 
A  few  of  its  points  call  for  comment.  No  shocking 
methods  of  German  warfare  are  a  reason  for  a  bellig- 
erent abridging  the  clear  trade  rights  of  neutrals. 
As  for  our  use  of  the  principle  of  continuous  voyage 
in  the  Bermuda  cases,  we  did  not  invent  the  principle 
but  took  it  over  from  British  practice.  Our  Supreme 
Court  in  the  Matamoros  cases  specifically  halted  us 
from  such  a  distortion  of  the  principle  as  Britain 
now  makes :  namely,  the  blockading  of  a  neutral  port 
to  prevent  even  non-contraband  from  moving  over- 
land to  the  enemy. 

The  British  plea  of  necessity  and  altered  circum- 
stances sounds  like  the  German  justification  of  the 
terrors  of  their  submarine  warfare,  or  of  their  march 
through  Belgium.     The  reference  to  the  flourishing 


92     ECONOMIC  ASPECTS  OF  THE  WAR 

condition  of  our  export  trade  did  not  impress  us. 
The  total  figures  of  our  exports  were  indeed  large, 
but  the  presence  of  a  large  volume  of  mushroom  trade 
like  war  orders  did  not  compensate  for  the  enormous 
loss  sustained  by  such  great  interests  as  cotton. 
Above  all,  large  exports  to  the  Allies  did  not  soothe 
our  feeling  that  the  principle  of  neutrality  was  being 
violated  when  we  supplied  the  Allies  and  yet  allowed 
them  unlawfully  to  prevent  us  from  trading  with 
the  Central  Empires. 


CHAPTER  VI 

Some  Effects  and  Aspects  of  the  Blockade 

Since  the  blockade  was  instituted,  there  has  been 
a  continuous  series  of  seizures,  detentions,  confisca- 
tions or  purchases.  To  further  "legalize"  its  actions 
the  British  Government  adopted  on  March  23  a  new 
development  in  "international"  law — as  usual  an 
Order  in  Council — already  described  in  connection 
with  the  Wilhelmina  case.  This  Order  provided  that 
the  cargo  of  any  neutral  ship  in  a  British  port, 
which  had  not  yet  been  condemned,  might  be  requisi- 
tioned. Any  vessel  bound  from  the  United  States  to 
any  port  in  Europe  might  be  brought  into  a  British 
harbor  in  accordance  with  the  terms  of  the  March  11 
or  October  29  Orders  in  Council.  If  Great  Britain 
could  find  no  ground  for  condemning  a  cargo  from 
the  United  States  to  a  neutral  country,  it  could  now 
purchase  that  cargo  and  prevent  it  from  reaching 
its  destination. 

After  March  30  all  seizures  by  the  British  Admir- 
alty of  neutral  vessels  sailing  from  America  for 
neutral  ports  were  in  defiance  of  the  attitude  of  our 
government,  excepting  as  the  seizures  were  made  for 
the  purpose  of  discovering  absolute  contraband  for 
Germany  whose  presence  might  be  justly  suspected. 

A  few  instances  will  illustrate  the  policy  of  deten- 


94     ECONOMIC  ASPECTS  OF  THE  WAR 

tion.  On  March  30  the  Danish  steamer  Louisiana 
left  New  York  for  Copenhagen.  On  April  16  she 
was  taken  to  Kirkwall.  On  April  26  she  was  ordered 
to  proceed  to  Hull,  where  the  foodstuffs  in  her  cargo 
were  to  be  passed  on  by  a  prize  court.  On  March  24 
the  Lapland  sailed  for  Copenhagen.  On  April  9 
she  was  seized  and  taken  to  Kirkwall;  on  April  14 
she  was  transferred  to  Barrow,  where  her  provisions 
were  unloaded  and  thrown  into  court. 

It  is  recalled  that  five  ships  of  the  American  Gans 
Steamship  Company  were  detained  in  November,  and 
after  many  adventures  succeeded  finally  in  getting 
their  case  set  for  June  7.  By  the  middle  of  May 
twelve  other  steamers,  with  provisions  for  Scandi- 
navia to  the  value  of  $11,000,000,  lay  in  British 
ports.  All  the  expenses  of  delay  rested  upon  Ameri- 
can packers.  Those  in  this  country  who  knew  the 
facts  were  indignant. 

We  have  already  reviewed  the  April  13  pro- 
ceedings in  the  British  prize  court  regarding  the 
detained  meat  cargoes.  Though  they  were  detained 
in  November,  the  British  Government  was  not  ready 
to  go  on  with  the  cases  in  April.  The  scandal  of 
those  proceedings  reached  this  country  in  the  letter 
correspondence  of  the  Associated  Press,  though  the 
British  censors  prevented  cable  news  of  it  from 
crossing  the  Atlantic. 

In  May  the  British  Government  was  disturbed  at 
the  growing  discontent  in  America  because  of  the 
detention  policy,  and  also  because  Mr.  Urion,  who 
had  been  in  England  representing  the  packers  and 


EFFECTS  OF  THE  BLOCKADE    95 

who  had  failed  to  get  satisfactory  action,  was  de- 
parting for  America  to  see  what  could  be  done  in 
Washington.  With  the  double  purpose  of  discount- 
ing what  Mr.  Urion  might  say  and  forestalling  an 
American  note  on  detention,  on  May  21  the  British 
Foreign  Office  issued  a  statement  to  the  American 
press  correspondents  in  London,  which  was  promptly 
cabled  to  this  country.  The  cabled  account  reached 
the  United  States  two  days  before  Mr.  Urion  did. 

The  British  statement  began  by  saying  that  only 
three  American-owned  ships  were  detained  in  Eng- 
land. The  first  of  these  was  the  Joseph  W.  Fordney, 
captured  off  the  coast  of  Norway.  This  vessel  was 
detained,  it  was  stated,  because  she  apparently  tried 
to  evade  the  patrols  of  His  Majesty's  Government. 
It  was  declared  that  the  consignments  of  the  Joseph 
W.  Fordney  were  addressed  to  a  person  in  Sweden 
who  was  suspected  by  the  British  Government  of 
supplying  food  to  Germany. 

It  was  then  stated  that  of  thirty-six  detained  ships 
with  American  cargoes  aboard,  twenty-three  had 
cotton  cargoes.  The  announcement  said  that  none  of 
the  cargoes  had  been  stopped  excepting  when  des- 
tined directly  to  Germany,  or  when  there  was  suspi- 
cion that  the  cotton  was  mo^dng  to  Germany  via  a 
neutral  country.  "It  was  never  suggested,"  the 
author  of  the  statement  continued,  "that  vessels  or 
cargoes  with  an  enemy  destination  should  be  allowed  ■ 
to  proceed." 

With    regard    to    provisions,    Great    Britain,    it 
appeared    from    this    British    statement,    had    been 


96     ECONOMIC  ASPECTS  OF  THE  WAR 

carrying  on  negotiations  with  American  packers  for 
the  purpose  of  getting  them  to  limit  their  shipments 
into  neutral  European  countries  to  the  amounts 
actually  required  in  those  countries  for  home  con- 
sumption. It  was  added,  however,  that  the  packers 
made  their  acceptance  of  these  terms  conditional 
upon  the  purchase  by  the  British  Government  of  the 
detained  Scandinavian  cargoes,  at  the  prices  for 
which  they  would  have  sold  in  Scandinavia.  The 
demand  was  considered  exorbitant.  Therefore  it 
was  proposed  to  send  these  cases  through  the  prize 
court. 

The  familiar  British  argument  was  then  adduced, 
that  according  to  trade  statistics  America  could 
not  be  suffering  in  the  matter  of  its  exports  of  food- 
stuffs. It  was  stated  that  in  February,  1915,  our 
exports  to  European  neutrals  increased  more  than 
our  exports  to  Germany  and  Austria  decreased,  and 
note  was  taken  especially  of  a  large  increase  in  the 
export  of  lard  and  bacon  to  Scandinavian  and  Dutch 
ports,  the  intimation  being  that  some  of  this  mer- 
chandise was  reaching  Germany. 

In  all  British  procedure  regarding  us  there  is 
nothing  more  annoying  than  the  apparent  assump- 
tion that  we  can  be  silenced  by  the  money  argument. 
It  is  the  argument  that  appeals  to  those  who  have 
no  principles.  But  our  whole  contention  in  the  food- 
stuffs matter  is  a  question  of  principle.  That  was 
the  basis  of  our  March  30  note.  Moreover,  our 
March  30  note  insisted  on  the  right  without  hin- 
drance to  send  foodstuffs,  provisions,  into  Germany 


EFFECTS  OF  THE  BLOCKADE    97 

via  Scandinavia.  Therefore  how  were  we  to  be 
influenced  by  an  argument  that  the  large  quantities 
of  lard  moving  to  Scandinavia  caused  suspicion  that 
lard  might  be  trickling  through  to  Germany?  We 
had  expressly  denied  that  this  was  cause  for  lawful 
suspicion  or  detention. 

After  this  utterance  of  the  British  Foreign  Office, 
the  packers  promptly  explained  their  side  of  the 
matter.  The  British  Government,  they  said,  wanted 
the  provisions  auctioned  in  England  and  the  pro- 
ceeds handed  to  the  shippers.  The  latter  objected 
to  this.  First,  the  provisions  were  packed  for  the 
Scandinavian  market,  not  the  British.  This  meant, 
for  example,  that  the  bacon  contained  far  more  fat 
than  England  would  wish  for.  To  sell  Scandinavian 
provisions  in  the  British  open  market  would  mean 
certain  loss  to  the  American  packers,  under  the  best 
conditions.  The  dumping  of  $11,000,000  of  meat 
products  on  any  market  would  depress  its  prices  to 
abnormal  levels.  The  packers  thought  that  Britain 
should  pay  them  the  contract  price  of  the  cargoes. 

Surely  Great  Britain  could  not  have  been  count- 
ing on  a  supposed  American  sentiment  against  the 
Chicago  packers,  which  was  expected  to  influence 
this  country  against  any  intervention  on  their  be- 
half. This  would  explain  the  difference  in  treatment 
afforded  by  Great  Britain  with  reference  to  cotton 
and  to  cargoes  of  provisions  destined  for  European 
neutrals.  England  promised  to  purchase  cotton 
cargoes  at  the  price  contracted  for  in  Europe,  while 
with  regard  to  provisions  this  treatment  was  refused. 


98     ECONOMIC  ASPECTS  OF  THE  WAR 

— But  the  British  Government  must  have  recognized 
that,  after  all,  our  packers  are  the  selling  agents 
abroad  for  the  meat  products  of  American  farms. 

On  May  24,  representatives  of  the  Chicago  pack- 
ers met  in  Washington.  Their  agent  had  returned 
from  London  with  the  story  of  his  months  of  fruitless 
effort  to  get  provision  ships  through  the  prize  court. 
On  the  evening  of  the  24th  they  met  the  Secretary 
of  State,  and  a  meeting  was  arranged  for  the  follow- 
ing day  between  representatives  of  the  meat  men,  of 
the  State  Department  and  of  the  British  Embassy. 

This  meeting,  however,  did  not  solve  the  problem. 
A  public  statement  was  prepared,  but  the  packers 
decided  not  to  issue  it.  So  far  as  we  have  informa- 
tion of  the  May  25  proceedings,  the  British  repre- 
sentatives would  not  consent  to  the  purchase  of  the 
provisions  by  their  government  at  the  Scandinavian 
contract  prices,  while  the  packers  would  not  consent 
to  limit  their  exports  of  provisions  to  Scandinavia 
to  the  amounts  which  Britain  deemed  normal.  How- 
ever, a  tentative  agreement  was  reached  regarding 
future  shipments.  The  packers  consented  to  notify 
British  officials  in  this  country  a  reasonable  time  be- 
fore they  shipped  their  goods.  The  British  were  to 
be  given  a  fair  opportunity  to  ascertain  the  bona 
fide  neutral  destination  of  these  shipments.  ,  This 
being  ascertained,  the  British  officials  here  were  to 
certify  the  shipments,  and  they  were  to  be  free  of 
detention.  But  the  British  home  government  never 
accepted  this  arrangement. 

By  the  month  of  July,  1915,  there  were  $14,000,- 


EFFECTS  OF  THE  BLOCKADE  99 

000  of  provisions  for  neutral  Europe  held  up  in 
England.  Their  cases  in  the  prize  court  had  been 
repeatedly  postponed  at  the  request  of  the  British 
Attorney  General.  Settlement  looked  as  remote  as 
in  November,  1914.  Since  the  Washington  confer- 
ence in  May,  the  British  Government  had  made 
another  unacceptable  proposition  to  the  packers; 
namely,  the  government  offered  to  withdraw  the  cases 
if  the  goods  would  be  sold  in  England  and  if  the 
packers  would  guarantee  the  British  Government 
both  against  claims  for  detention  of  the  ships  and 
claims  on  the  part  of  neutral  European  buyers  who 
had  never  received  goods  which  they  had  paid  for. 

Therefore  on  July  14,  1915,  representatives  of 
the  packers  again  called  on  the  State  Department 
at  Washington.  On  July  16  the  long  postponed 
hearing  of  the  provisions  cases  was  to  be  resumed  in 
the  London  prize  court.  Both  the  April  13  hearing 
and  later  events  gave  clear  indication  that  the  prize 
court  would  treat  the  cargoes  under  the  Orders  in 
Council,  in  disregard  of  what  we  considered  our 
rights  under  international  law.  So  on  July  15  our 
government  sent  the  so-called  "caveat"  note  to  Eng- 
land, intended  partly  for  the  information  of  the 
prize  court. 

In  view  of  the  difference  of  opinion  apparently 
existing  between  England  and  America  regarding 
the  principles  of  international  law  governing  prize 
court  procedure.  Ambassador  Page  was  asked  to 
inform  England  that  we  should  recognize  no  action 
of  its  prize  courts  proceeding  under  British  munici- 


100   ECONOMIC  ASPECTS  OF  THE  WAR 

pal  enactments  (Orders  in  Council)  and  not  under 
the  recognized  principles  of  international  law. 

The  answer  to  this  warning  came  on  July  31. 
The  British  Government  declared  itself  unaware  of 
any  differences  between  America  and  England  as 
to  the  principles  of  law  applicable  to  prize  courts. 
It  was  asserted  that  in  both  countries  these  courts 
were  subject  to  the  instruction  of  their  sovereign 
and,  in  the  absence  of  such  instruction,  to  the  gen- 
eral rules  of  international  law.  A  decision  of  Lord 
Stowell  was  cited  stating  that  there  is  no  inconsis- 
tency in  the  duty  of  the  court  to  enforce  at  the  same 
time  the  King's  Orders  in  Council  and  the  established 
rules  of  law,  because  the  Orders  are  never  in  conflict 
with  that  law.  The  judge  said  he  could  not  "with- 
out extreme  indecency"  contemplate  or  discuss  his 
course  in  the  impossible  emergency  that  a  conflict 
between  the  old  and  the  proposed  law  should  arise. 

It  was  pointed  out  that  United  States  citizens, 
if  dissatisfied  with  the  decision  of  a  British  prize 
court,  might  appeal  to  His  Majesty's  Council.  If 
retrial  were  there  denied,  recourse  might  be  had 
to  an  international  tribunal.  The  hope  was  ex- 
pressed that  this  note  might  relieve  the  misappre- 
hensions under  wliich  the  American  Government 
seemed  to  be  laboring  with  regard  to  the  principles 
of  law  applied  in  British  prize  courts. 

At  present  the  packers  will  sell  to  neutral  Europe 
only  on  terms  of  cash  before  shipment.  The  buyer 
must  take  the  risk  of  British  detention  and  perhaps 
confiscation.     It  is  a  risk  no  one  dares  to  assume. 


EFFECTS  OF  THE  BLOCKADE    101 

No  regular  steamship  line  to  Scandinavia  will  accept 
meat  products  unless  certified  as  to  Scandinavian 
destination  by  a  representative  in  America  of  the 
Scandinavian  country,  and  also  by  a  British  consul.* 

It  should  be  noted  also  that  the  British  notification 
on  March  1,  that  shipments  to  and  from  Germany 
would  be  seized,  resulted  at  once  in  a  modification  of 
insurance  contracts — even  those  of  our  own  Govern- 
ment War  Risk  Insurance  Bureau — declaring  the 
insurance  void  in  the  case  of  goods  proving  to  be  of 
German  destination,  ownership  or  origin;  and  insur- 
ance on  such  goods  is  still  unavailable. 

With  respect  to  the  consular  certificates  de- 
manded on  meat  shipments  to  neutral  countries,  it 
must  be  observed  that  these  certificates,  with  the 
further  evidence  even  of  the  seal  of  Great  Britain 
placed  by  a  British  consul  on  the  hatches  of  vessels, 
are  regarded  by  the  English  naval  officers  only  as 
collateral  evidence ;  they  do  not  exempt  from  search. 
Moreover,  British  pressure  has  forced  Scandinavian 
consignees  to  give  the  most  stringent  guarantees  as 
to  the  home  consumption  of  American  shipments, 
before  these  shipments  may  be  delivered  at  the 
Scandinavian  port. 

Denmark,  for  example,  has  two  lines  from  the 
United  States :  the  Interocean  Transportation  Com- 
pany and  Det  Forenede  Dampskibs  Selskab  (the 
Scandinavian- American  Line). 

*Oii  May  3  the  British  Embassy  at  "Washington  issued  a 
statement  of  instructions  to  American  exporters  as  to  how  to 
ship  to  neutral  Europe.     It  is  printed  in  Appendix,  p.  325. 


102  ECONOMIC  ASPECTS  OF  THE  WAR 

The  Interoccan  makes  the  American  sliipper  attach 
to  his  bill  of  lading  a  sworn  affidavit  to  the  effect 
that  his  statement  of  the  merchandise  shipped  Is 
true,  and  that  it  has  positively  no  other  destina- 
tion than  the  named  consignee.  The  Scandinavian- 
American  Line  has  the  following  in  its  bill  of  lading, 
printed  in  red: 

"Consignees  of  the  within  goods  are  under  the 
obligation  to  furnish  Det  Forenede  Dampskibs  Sel- 
skab  at  Copenhagen  promptly  and  on  demand  a 
written  declaration  that  the  within  goods  are  for 
consumption  in  country  of  destination  shown  in  this 
bill  of  lading,  and  will  not  be  re-exported.  A  failure 
to  provide  such  a  declaration  gives  the  shipowner 
the  right  to  withhold  delivery  of  the  goods  or  dis- 
charge them  at  any  place,  whereupon  each  and  every 
liability  of  the  shipowner  shall  cease." 

Yet  this  is  not  the  end.  Britain  has  forced  the 
Danish  lines  to  deliver  only  to  those  Danish  con- 
signees who  submit  to  having  their  books  examined 
and  approved  by  an  accountant  appointed  by  a 
British  official  in  Denmark.  This  accountant  is  to 
be  paid  by  the  Danish  merchant.  His  purpose  is 
to  see  where  the  goods  of  the  merchant  go.  Before 
the  merchant  gets  American  goods  from  the  steamer 
he  must  deposit  in  a  bank  money  equal  to  the  value 
of  the  goods.  This  money  is  forfeited  to  the  British 
consulate  if  the  merchant  fails  to  see  that  the  ac- 
countant certifies  the  disposition  of  the  shipment. 

The  official  British  ruling  on  this  point,  enforced 
by  the  steamship  lines,  is  of  interest.    The  merchant, 


EFFECTS  OF  THE  BLOCKADE    103 

it  is  ordered,  must  agree  to  the  appointment  by  the 
British  consulate  of  a  chartered  accountant 

"to  examine  books  and  business  in  order  to  satisfy 
itself  (the  consulate)  as  to  the  actual  disposal  of 
the  consignment ;  and  deposit  of  a  bank  guarantee  of 
full  value  of  the  consignment,  to  be  forfeited  to  His 
Majesty's  consulate  in  case  of  non-fulfillment  of 
declaration.  Expenses  of  chartered  accountant  to 
be  borne  by  the  company." 

There  is  only  one  way  out  of  this  labyrinth  into 
which  our  legitimate  commerce  has  been  forced  to 
wander.  No  one  but  the  United  States  Government 
knows  the  way.  No  European  neutral  is  strong 
enough  to  resist  whatever  use  Britain  may  choose 
to  make  of  her  sea  power,  for  every  European  neu- 
tral is  dependent  upon  imports  of  our  food  which 
must  pass  by  British  warships.  No  European 
neutral  has  said  that  it  would  resist  Britain  or  dared 
to  say  it.  We  have  dared  to  say  this.  In  our 
March  30  note  we  have  declared  as  subversive  of 
international  law  interference  with  our  commerce 
with  neutrals;  and  we  have  said  we  cannot  stop 
shipping  food  to  Germany  via  neutrals  without  vio- 
lating the  neutrality  we  choose  to  observe. 

This  matter  of  the  right  to  ship  food  and  other 
non-contraband  to  Germany  is  the  crux  of  the  whole 
situation.  Once  insist  upon  that  and  the  whole  struc- 
ture of  interference  with  our  neutral  commerce 
tumbles  like  a  house  of  cards.  Once  admit,  even 
tacitly,  the  right  to  interfere  with  food  to  Germany 


104   ECONOMIC  ASPECTS  OF  THE  WAR 

and  the  whole  British  structure  of  interference  is 
the  logical  law  of  the  sea. 

If  Britain  may  lawfully  stop  our  food  for  Ger- 
many via  neutrals,  it  may,  if  it  can,  force  those 
neutrals  to  place  export  embargoes  on  the  food  for 
Germany. 

If  food  from  the  United  States  may  not  go 
through  Denmark  to  Germany,  it  is  virtually  contra- 
band. 

Then  Britain  cannot  be  blamed  for  detaining, 
searching  and  annoying  our  shipments  to  Denmark; 
for  they  then  carry  contraband  and  by  law  Britain 
may  use  every  means  to  prevent  contraband  from 
moving  into  Germany.  To  prevent  the  losses  to 
steamers  due  to  such  detentions,  steamship  lines  are 
bound  to  protect  themselves  against  the  possibility 
of  carrying  shipments  that  will  be  viewed  suspi- 
ciously by  Britain.  In  order  to  be  allowed  to  get 
goods,  Scandinavian  merchants  naturally  submit  to 
any  procedure  that  will  make  them  personam  gratae 
to  Britain.  In  order  to  be  allowed  to  ship  goods, 
American  exporters  naturally  turn  to  His  Majesty's 
Government  for  guidance  as  to  the  conditions  under 
which  they  may  ship  to  neutral  countries. 

For  many  reasons  the  United  States  should  act. 
It  should  force  Great  Britain  to  allow  our  foodstuffs 
to  reach  Germany,  and  thus  remove  the  intolerable 
suspicion  that  adheres  to  our  shipments  to  European 
neutrals.  Great  material  interests  are  involved. 
The  genuineness  of  our  neutrality  is  at  stake.  And 
apart  from  the  questions  of  neutrality  and  interest 


EFFECTS  OF  THE  BLOCKADE    105 

In  the  present  crisis,  we  must  remember  the  constant 
menace  in  the  future  of  such  precedents  as  Great 
Britain  has  sought  to  establish,  all  tending  toward 
the  one  conclusion  that  the  nation  dominant  in  sea 
power  may  adopt  in  restraint  of  commerce  any 
measure  it  sees  fit. 

It  is  perhaps  worth  while  to  picture  a  situation 
where,  with  sea  power  differently  distributed  and 
other  belligerents  engaged,  the  latent  danger  of  the 
precedent  now  being  established  would  come  to  light. 

Suppose  in  a  future  war  that  Japan's  fleet  rules 
the  high  seas  and  that  Japan  is  at  war  with  England. 
Japan  decides  to  starve  England,  since  that  is 
simpler  and  less  strenuous  than  defeating  England 
by  military  force.  Japan  therefore  declares  a 
blockade  of  England.  Its  blockading  cordon,  how- 
ever, because  of  the  efficiency  of  the  British  sub- 
marines, is  not  able  to  invest  the  British  ports, 
operate  around  the  British  Isles  or  even  hold  the 
North  Sea.  Great  Britain  undisturbed  trades  over- 
sea in  that  direction.  However,  the  Japanese 
squadrons,  a  thousand  miles  off  the  British  coast  or 
even  across  the  seas,  intercept  Argentine  grain  and 
meat  as  it  leaves  Buenos  Ayres.  Japanese  ships 
stop  and  confiscate  Australian  mutton  and  Indian 
wheat  long  before  they  reach  England. 

These  ships  also  hold  up  and  appropriate  all 
American  exports  of  wheat,  flour  and  provisions,  on 
their  way  to  England  across  the  Atlantic  Ocean. 
They  stop  not  only  the  exports  destined  for  England 
but  also  those  destined  for  the  rest  of  Europe,  on 


106   ECONOMIC  ASPECTS  OF  THE  WAR 

the  ground  that  thej  might  in  some  way  get  to 
Enghind.  All  during  these  hold-ups  of  American 
commerce,  Russian  grain  would  move  unhindered  to 
Great  Britain,  for  Japan  could  not  hold  the  North 
Sea.  Danish  provisions  would  supply  the  market 
which  once  Americans  held.  England  would  not 
starve.  It  would  be  American  citizens  dependent  on 
the  British  market  who  would  starve. 

If  the  British  blockade  of  Germany  be  admitted 
as  valid,  the  entire  law  of  blockade  as  evolved  from 
centuries  of  experience  will  be  abolished,  and  the 
possibilities  of  the  future  contain  endless  menace. 
England  does  not  invest  the  German  coast.  She  does 
not  invest  anything.  The  blockade  does  not  affect 
all  neutrals.  Some  are  quite  free  from  it.  Norway 
and  Sweden  trade  with  the  Baltic  ports  of  Germany 
as  if  there  were  no  war,  for  Germany,  not  England, 
holds  the  Baltic.  A  Swedish  exporter  of  lumber  can 
send  it  unmolested  over  the  high  seas  from  Gothen- 
burg to  Stettin,  a  German  Baltic  port.  But  if  a 
Mobile  exporter  shipped  a  cargo  to  Stettin  it  would 
never  arrive.  England  would  seize  it  as  it  passed 
the  British  Isles. 

England  blockades,  not  all  commerce  with  the 
German  Baltic  ports,  but  only  such  commerce  as 
can  be  reached  by  British  cruisers  without  too  inti- 
mate association  with  German  mines  and  torpedoes. 
That  is,  the  precedent  is  being  established  that  it  is 
right  and  lawful  for  a  belligerent  with  some  degree 
of  sea  power  to  ban  our  trade  if  it  can  intercept  our 
trade,  whether  it  can  so  intercept  the  trade  of  other 


EFFECTS  OF  THE  BLOCKADE    107 

neutral  nations  or  not.  This  is  a  new  definition  of 
blockade.  The  word  blockade  means  nothing  under 
such  circumstances.  Instead  of  a  blockade,  such 
action  means  an  intolerable  interference. 

Were  Japan  or  any  other  country  so  to  shut  off 
our  food  exports  to  England,  the  wheat  farmers 
would  feel  the  same  distress  that  has  come  upon  the 
cotton  planters  in  the  struggle  of  the  Allies  with 
Germany. 

Nor  is  our  acquiescence  in  the  present  order  of 
things  in  accordance  with  our  precedents,  especially 
with  our  profession  of  the  obligation  to  supply  food 
to  both  belligerents  if  our  neutrality  is  to  be  unim- 
paired. 

In  1793,  England,  then,  as  now,  without  main- 
taining a  legal  blockade,  undertook  to  capture  all 
food  products  bound  for  France.  The  instructions 
of  our  then  Secretary  of  State,  Thomas  Jefferson, 
to  Thomas  Pinckney,  our  Minister  to  Great  Britain, 
are  illuminating  today.  Asserting  that  "no  nation 
can  agree,  at  the  mere  will  or  interest  of  another, 
to  have  its  peaceable  industry  suspended  and  its 
citizens  reduced  to  idleness  and  want,"  Jefferson 
continued : 

"Were  we  to  withhold  from  France  supplies  of  pro- 
visions, we  should  in  like  manner  he  hound  to  withhold 
them  from  her  enemies  also,  and  thus  shut  to  our- 
selves all  the  ports  of  Europe  where  corn  is  in  de- 
mand, or  make  ourselves  parties  in  the  war.  This  is 
a  dilemma  which  Great  Britain  has  no  right  to  force 
upon  us,  and  for  which  no  pretext  can  be  found  in 


108   ECONOMIC  ASPECTS  OF  THE  WAR 

any  part  of  our  conduct.  She  rtiay^  indeedy  feel  the 
desire  of  starving  an  enemy  nation,  hut  she  can  have 
no  right  of  doing  it  at  our  loss  nor  of  making  us  the 
instrumejits  of  it.'"* 

It  is  of  interest  to  note  that  from  September  of 
1914  to  May,  1915,  inclusive,  we  exported  foodstuffs 
to  the  values  of  $395,700,000,  or  $241,600,000  more 
than  during  the  same  period  of  the  year  preceding. 
The  larger  part  of  these  exports  went  to  England. 
What  if  we  should  decide  today  that  an  abandon- 
ment of  our  right  to  send  foodstuffs  to  Germany 
means  that  we  should  in  like  manner  be  hound  to 
withhold  them  from  her  enemies  also? 

In  the  reorganization  of  the  British  Cabinet  in 
May,  1915,  two  members  were  added  who,  to  be 
consistent,  must  support  America's  contention  re- 
garding the  illegality  of  the  present  form  of  the 
British  blockade.  These  new  members  are  Mr.  Bal- 
four, head  of  the  Admiralty,  and  Lord  Lansdowne. 

In  our  March  30  note  to  Great  Britain,  we  de- 
clared our  right  to  trade  with  Germany  via  neutral 
countries  even  if  a  blockade  of  German  ports  were 
maintained.  To  renounce  this  right,  we  declared, 
would  be  to  renounce  our  neutrality.  But  we  denied 
that  Britain  was  maintaining  a  legal  blockade.  We 
stated  its  weakness  in  these  words: 

"The  Scandinavian  and  Danish  ports,  for  example, 
,  .  .  are  free,  so  far  as  the  actual  enforcement  of  the 
Order  in  Council  is  concerned,  to  carry  on  trade  with 

*  For  the  full  text  of  Jefferson's  letter,  see  Appendix,  p.  318. 


EFFECTS  OF  THE  BLOCKADE    109 

German  Baltic  ports,  although  it  Is  an  essential  ele- 
ment of  blockade  that  it  bear  with  equal  severity 
upon  all  neutrals." 

In  other  words,  we  declared  that  England  had  no 
right  to  bar  our  commerce  with  German  Baltic 
ports. 

Mr.  Balfour,  before  he  joined  the  Cabinet,  pub- 
licly admitted  the  truth  of  this  contention.  We 
must,  therefore,  support  our  case  in  the  new  Cabinet. 
In  an  interview  cabled  from  London  to  the  New 
York  Times  on  March  27,  discussing  this  novel 
feature  of  the  British  blockade,  he  ably  explained 
the  rule  that  a  blockade  must  bar  the  commerce  of 
all  neutrals  with  a  belligerent : 

"It  (this  rule)  Is  designed  to  prevent  the  blockad- 
ing power  using  its  privileges  in  order  to  mete  out 
different  treatment  to  different  countries,  as,  for 
instance,  by  letting  the  ships  of  one  nationality  pass 
the  blockading  cordon  while  it  captures  the  ships  of 
another.  Such  a  procedure  is  on  the  face  of  it  unfair. 
It  could  have  no  object  but  to  assist  the  trade  of  one 
neutral  as  against  the  trade  of  another  and  arbi- 
trarily to  redistribute  the  burden  which  war  un- 
happily inflicts  on  neutrals  as  well  as  on  belliger- 
ents." 

Mr.  Balfour,  while  agreeing  that  England's  pres- 
ent blockade  violates  this  principle,  offered  the  excuse 
that  "the  discrimination,  if  it  may  be  so  designated, 
is  not  the  result  of  deliberate  policy  but  of  a  geo- 
graphical accident." 


110   ECONOMIC  x\SPECTS  OF  THE  WAR 

But  this  defense  did  not  even  convince  Mr.  Balfour. 
He  finally  admitted: 

"But,  after  all,  it  is  the  equity  of  the  Allies'  case 
rather  than  the  law  which  mainly  interests  the  tliink- 
ing  public  of  America  and  elsewhere." 

Again,  this  is  the  assumption  that  Britain  is  fight- 
ing our  battle  and  we  must  therefore  let  her  do  as 
she  pleases  in  destroying  our  commerce  as  a  means 
to  attain  her  end. 

If,  then,  there  is  no  blockade  which  we  can,  as 
neutrals,  admit,  and  none  which  the  first  Lord  of 
the  Admiralty  in  the  British  Cabinet  can  defend,  we 
turn  to  another  distinguished  British  statesman  to 
learn  what  our  rights  are.  It  is  recalled  that,  at  the 
time  of  the  Boer  War,  Lord  Salisbury  stated  that 
conditional  contraband  could  not  be  stopped  by  a 
belligerent  unless  shown  to  be  destined  to  the  military 
of  the  enemy. 

At  this  point  the  second  member  of  the  British 
Cabinet,  Lord  Lansdowne,  tells  us  our  further  rights 
in  the  matter.  He  tells  us  that  we  must  not  recog- 
nize the  action  of  a  belligerent  (an  English)  prize 
court  which  stops  our  foodstuffs  (to  Germany)  in 
violation  of  the  principle  Lord  Salisbury  laid  down. 

It  is  remembered  that  in  1904  Russia  seized  food 
destined  to  the  civil  population  of  Japan.  Lord 
Lansdowne,  we  recall,  then  Foreign  Secretary,  wrote 
a  letter  to  Joseph  Choate  describing  the  warning 
issued  to  Russia. 


EFFECTS  OF  THE  BLOCKADE    111 

"His  Majesty's  Government  further  pointed  out 
that  the  decision  of  the  prize  court  of  the  captor  in 
such  matters,  in  order  to  be  binding  on  neutral  states, 
must  be  in  accordance  with  the  recognized  rules  and 
principles  of  international  law  and  procedure." 

That  is,  Lansdowne  seems  to  say  that  every  one 
of  the  hundreds  of  British  seizures  of  vessels  with 
American  cargoes  would  have  been  illegal  even  if 
they  had  been  destined  for  Germany.  In  the  Cabi- 
net he  must  contend  that  the  British  seizures  of  our 
exports  to  neutral  ports  were  doubly  beyond  the 
pale  of  all  law. 


CHAPTER  VII 

Starting  the  Cotton  Movement 

In  tlie  production,  ginning  and  warehousing  of  the 
annual  cotton  crop,  direct  employment  is  given  to 
more  than  four  millions  of  people,  and  a  livelihood  to 
many  more.  Upon  the  successful  growth  and  upon 
the  prompt  and  satisfactory  marketing  of  cotton  are 
dependent  all  other  business  interests  of  the  South, 
and  the  earning  power  of  thousands  of  miles  of  rail- 
way. Moreover,  since  the  South  depends  upon  cotton 
for  its  ability  to  purchase  other  goods,  any  deficiency 
in  growth,  depression  of  values  or  interference  with 
marketing  means  an  immediate  adverse  affect  upon 
agricultural,  mercantile  and  manufacturing  activi- 
ties in  the  rest  of  the  country. 

It  happens  that  successful  marketing  of  the  cotton 
crop  depends  primarily  upon  getting  it  into  the 
export  trade.  In  recent  years  two-thirds  of  the 
cotton  crop  has  been  exported  and  only  one-third 
consumed  in  this  country. 

Interference  with  the  foreign  movement  is  thus  the 
most  serious  evil  that  can  befall  the  South,  far  worse 
than  a  partial  crop  failure  due,  for  example,  to  the 
boll  weevil.  If  the  foreign  market  is  open,  high 
prices  are  paid  for  the  cotton  that  escapes  a  crop 
failure.    The  total  cotton  value  is  thus  often  as  large 


STARTING  COTTON  MOVEMENT      113 

in  years  of  partial  crop  failure  as  in  years  of  heavy 
yield.  The  twelve  milHon  bales  of  1910  were  worth 
$100,000,000  more  than  the  16,250,000  bales  of 
1911.  But  if  the  foreign  market  or  any  essential 
part  of  it  is  closed,  ruinously  low  prices  greet  every 
participant  in  the  crop.  In  the  midst  of  apparent 
plenty,  everyone  is  in  want. 

Such  a  result  in  the  South  was  brought  about  in 
the  fall  of  1914,  because  of  the  European  War. 
England,  the  largest  consumer  of  our  cotton,  nor- 
mally takes  3,500,000  bales  per  year,  over  one-third 
of  our  total  cotton  exports.  Germany  and  Austria 
come  next  and  normally  take  from  2,500,000  to 
3,000,000  bales  of  cotton,  nearly  one-third  of  our 
exports.  The  war  would  inevitably  have  affected 
the  cotton  trade  adversely.  But  the  effect  was 
accentuated  by  the  threatening  attitude  of  England 
towards  our  commerce,  which  kept  the  German 
market   for  cotton  closed  until  the  winter  months. 

The  pressure  in  the  South  of  those  3,000,000  bales, 
for  which  exit  was  long  denied,  helped  force  the  price 
of  cotton  dowTi  to  6  cents  per  pound.  The  cost  of 
producing  is  supposed  to  average  about  8  cents. 
At  this  low  price  of  6  cents,  thousands  of  the  little 
cotton  farmers,  the  rank  and  file  of  the  South,  were 
forced  to  part  with  their  product.  They  had  not 
the  financial  power  to  hold  the  cotton  until,  along 
in  the  spring  of  1915,  its  price  rose  to  10  cents, 
owing  to  a  temporary  reopening  of  the  path  to  Ger- 
many, the  broadening  demand  of  other  countries  and 
the  activities  of  our  own  mills.     It  was   the  large 


114   ECONOMIC  ASPECTS  OF  THE  WAR 

planters,  dealers  and  English  importers  who  were 
able  to  hold  the  cotton  and  profit  from  the  advance. 
The  farmers  were  hard  hit. 

The  cotton  year  starts  August  1.  About  that 
date  begins  the  export  movement  of  the  new  crop. 
In  the  second  half  of  July,  1914,  "spot  cotton" — 
that  is,  cotton  for  immediate,  not  future  delivery — 
was  selling  in  New  York  for  I3I/4  cents  per  pound; 
on  July  27,  with  war  threatening,  it  was  121/4  cents. 
Two  days  later,  with  war  certain,  this  price  had 
dropped  to  11%  cents.  On  July  31  the  New  York 
and  New  Orleans  Cotton  Exchanges  closed. 

With  the  entrance  of  England  into  the  war  on 
August  4,  shipping  was  paralyzed.  Most  of  our 
commerce  has  been  carried  in  British  and  German 
ships  and  no  such  ship  dared  venture  out  to  sea 
because  both  English  and  German  cruisers  were  on 
the  North  Atlantic.  The  ordinary  marine  insurance 
carried  on  the  hulls  and  cargoes  of  these  ships  did 
not  protect  them  against  the  danger  of  capture  or 
destruction.  Against  this  new  peril,  war  risk  insur- 
ance was  necessary. 

The  German  ships  never  sailed  again,  but  kept 
their  American  ports,  being  so  much  tonnage  with- 
drawn from  the  carrying  trade.  Some  British  ships 
were  chartered  by  their  government  for  war  ser- 
vices. The  remainder  were  in  a  position  to  sail  when, 
a  short  time  after  August  1,  the  British  Government 
insured  against  war  risk  British  vessels  carrying  for 
the  United  Kingdom ;  and  when,  two  weeks  after  the 
outbreak    of    the    war,    the    British   Admiralty    an- 


STARTING  COTTON  MOVEMENT      115 

nounced  that  the  North  Atlantic  route  was  free  of 
German  cruisers.  This  partially  solved  the  prob- 
lem of  getting  American  cotton  exported  to  Eng- 
land. But  the  method  of  financing  such  shipments 
also  had  broken  down.  A  cotton  exporter  gets  his 
money  by  selling  to  his  bank  a  draft  drawn  on  the 
English  buyer  or  the  latter's  bank.  Owing  to  the 
disturbance  of  international  finance  and  the  paraly- 
sis of  the  London  discount  market,  such  drafts  be- 
came for  a  time  unsalable.  Yet  in  the  course  of  a 
few  weeks  this  financial  difliculty  was  largely  over- 
come, at  least  as  to  shipments  which  could  be  satis- 
factorily insured,  and  cotton  for  England  went  for- 
ward in  a  volume  that  was  substantial,  though  below 
normal. 

The  following  table  shows  the  exports  to  England 
up  to  June  1,  1915,  compared  with  exports  to  Eng- 
land in  the  corresponding  months  of  1913-1914. 


Comparison  of  Cotton  Exports  to  England,  by  Months, 
1913-1914  AND  1914-1915.     In  Bales 


1913-14 

August 77,488 

September 376,426 

October 514,105 

November 530,355 

December 473,028 

January 437,231 

February 328,794 

March 264,999 

April 147,298 

May 140,618 

Period   Aug.    1 

to  May  31 . . .  3,290,342 


1914-15 

Changes  1914-15 

6,370 

Decrease 

:       71,118 

50,980 

<< 

325,446 

232,065 

<( 

282,040 

333,700 

(( 

196,655 

572,396 

Increase 

99,368 

585,534 

<< 

148,303 

633,574 

" 

304,780 

440,490 

(< 

175,491 

378,828 

«< 

231,530 

359,675 

<< 

219,057 

3,593,612       ' 

303,270 

116   ECONOMIC  ASPECTS  OF  THE  WAR 

All  this  meant  that  In  the  early  months  of  the 
shipping  season,  the  months  vital  in  fixing  the  price 
paid  the  farmer,  the  largest  purchaser  of  American 
cotton  was  not  buying.  Therefore,  there  was  double 
reason  wliy  the  second  largest  purchaser,  Germany, 
should  without  hindrance  take  its  share. 

For  reasons  to  be  explained,  direct  shipments  to 
Germany  were  at  first  very  difficult.  Hence  during 
the  early  months  of  the  export  season,  beginning 
August  1,  cotton  had  to  move  into  Germany  via 
adjacent  neutral  European  countries.  That  is, 
instead  of  being  shipped  from  the  United  States  to 
Hamburg  or  Bremen,  cotton  was  shipped  to  Genoa, 
Rotterdam  or  Copenhagen  and  forwarded  to  Ger- 
many overland.  Or  it  was  shipped  to  Norway  or 
Sweden,  particularly  to  Gothenburg,  and  thence 
forwarded  to  Germany  by  sea. 

In  the  month  of  October  these  indirect  shipments 
into  Germany  began  to  go  forward  and  appeared  in 
our  export  figures,  which  showed  an  increase  in  ship- 
ments to  the  neutral  countries  adjacent  to  Germany, 
compared  with  the  corresponding  shipments  in  the 
same  month  of  the  year  before.  But  not  until  Jan- 
uary did  these  increases,  representing  cotton  for 
Germany,  begin  to  compensate  for  the  loss  in  direct 
shipments.  This  whole  situation  is  illustrated  by 
the  following  table: 


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118   ECONOMIC  ASPECTS  OF  THE  WAR 

The  remarkable  thing  about  the  table  of  exports 
to  England  is  that  they  show  that  the  total  exports 
of  American  cotton  into  England  have  been  larger 
in  the  present  year  than  in  the  past  year.  The 
increase  for  the  August  1-June  1  was  over  300,000 
bales.  It  w^as  only  in  the  early  months  of  the  war 
that  cotton  did  not  move  in  good  volume  to  England. 

Moreover,  the  decrease  in  the  total  cotton  move- 
ment into  Germany  and  Austria  has  not  been  so  large 
as  many  think.  The  drop  in  direct  exports  to  Ger- 
many and  Austria  was  2,258,000  bales.  But  the 
increase  in  shipments  via  adjacent  neutral  countries 
was  about  1,668,000  bales.  So  the  real  decrease  in 
exports  to  Germany  was  perhaps  not  over  500,000 
bales,  assuming — and  we  cannot  quite  assume — that 
Germany  got  all  the  excess  exports  moving  to 
adjacent  neutrals. 

It  is  recalled  that  the  New  York  and  New  Orleans 
Cotton  Exchanges  closed  on  July  31.  For  later 
quotations  on  the  price  of  cotton  we  are  mainly 
dependent  on  indi\adual  transactions  reported  from 
different  parts  of  the  South.  All  tell  the  same  story 
of  sinking  prices. 

Cotton  had  sold  in  New  York  for  11%  cents  in 
the  last  days  of  July.  On  August  10,  southern 
shippers  were  willing  to  deliver  it  to  New  England 
factories  for  11  cents.  On  August  21  it  sold  in 
Augusta  for  10^/2  cents,  on  August  26  for  91/2  cents. 
On  September  2  cotton  touched  8  cents ;  on  October 
6,  7%  cents ;  on  October  12  It  dropped  to  6%  cents ; 
and  on  October  19  sales  from  southern  points  were 


STARTING  COTTON  MOVEMENT      119 

reported  at  6  to  6%  cents  per  pound.  This  was  a 
price  of  desperation.  As  a  matter  of  fact,  cotton 
on  the  farm  was  selling  for  6  cents  all  during  Sep- 
tember and  October.  These  6-cent  sales  are  what 
finally  forced  the  United  States  to  act. 

If  there  had  been  the  customary  monthly  regu- 
larity of  movement  from  the  United  States  to  Eng- 
land and  Germany,  the  price  of  cotton  in  this  coun- 
try would  not  have  dropped  in  any  such  manner  as 
it  did.  The  rapid  fall  was  occasioned  partly  by  the 
fact  that  in  August  and  early  September  little  cotton 
was  bought  or  moved  either  to  England  or  Ger- 
many. The  fall  was  caused  partially  by  the  fear  of 
Americans  that  England  would  not  let  cotton  move 
to  Germany  at  all. 

Just  as  long  as  England  could,  she  fostered  this 
impression,  and  she  allowed  a  free  movement  only 
when  an  irresistible  force  was  applied  to  her ;  namely, 
the  force  of  a  direct  demand  from  Washington. 
This  demand,  brought  about  by  irate  southern 
senators,  was  supplied  with  a  promise  of  real  con- 
sequences should  it  not  be  met.  The  story  of  the 
quiet  English  ban  upon  our  cotton  trade,  and  its 
removal  in  October,  is  worth  reading. 

It  is  recalled  that,  under  the  codification  of  inter- 
national law  represented  by  the  Declaration  of  Lon- 
don, cotton  was  on  the  "free  list" ;  that  is,  it  was  one 
of  those  articles  which  could  not  be  declared  con- 
traband by  any  belligerent.  The  reason  is  obvious. 
It  is  a  prime  necessity  for  the  life  of  civilians  and  the 
raw  material  for  the  greatest  single  peaceful  indus- 


120   ECONOMIC  ASPECTS  OF  THE  WAR 

try  of  countries ;  namely,  the  textile  trades.  Upon 
the  unhampered  movement  of  cotton  in  international 
commerce  depends  the  prosperity  of  the  workers  in 
great  sections  of  the  civilized  world.  Excepting 
after  a  complicated  manufacturing  process,  cotton 
is  not  available  for  purposes  of  war. 

England,  we  know,  in  her  Order  in  Council  of 
August  20,  adopted  the  Declaration  of  London  as 
her  rule  of  international  law,  with  certain  excep- 
tions. Cotton  was  not  affected  by  the  exceptions 
either  in  the  August  20  Order  or  in  any  successive 
one.  That  is,  England  by  announcement  was 
pledged  to  consider  cotton  as  a  free  good  that  could 
move  unhindered  to  Germany  in  all  but  German  ships 
or  those  of  Germany's  Allies. 

During  August  there  was  the  same  initial  diffi- 
culty in  getting  cotton  started  for  Germany  as  in 
getting  it  started  for  England.  This  cotton  nor- 
mally moves  in  full  shiploads  in  "tramp"  steamers, 
chartered  for  the  voyage.  Most  of  these  steamers 
are  under  the  German  or  the  British  flag.  Those 
under  the  German  flag  dared  not  venture  on  the 
seas,  which  England  controlled.  Those  under  the 
British  flag  were  of  course  not  available  to  carry 
cotton  to  England's  enemy.  That  left  for  considera- 
tion ships  of  neutral  countries :  the  United  States 
and  other  neutrals. 

Since  the  United  States  owned  few  ships  built  to 
cross  the  Atlantic,  the  most  promising  candidates 
seemed  the  ships  of  other  nations.  These  were,  how- 
ever, out  of  the  question  with  regard  to  direct  exports 


STARTING  COTTON  MOVEMENT     121 

to  Germany,  because  of  the  peculiar  conditions  sur- 
rounding hull  and  cargo  insurance,  without  which  no 
shipowner  or  shipper  can  let  his  property  sail.  This 
difficulty  is  connected  with  British  control  of  the 
vessel  insurance  business  for  the  whole  world,  a  con- 
trol which  was  naturally  exercised  to  injure  the 
enemy  of  England. 

As  for  marine  insurance,  neutral  vessels  could 
without  difficulty  obtain  it  from  the  German  and 
neutral  marine  insurance  companies,  including  the 
American.  But  they  could  obtain  no  war  risk  insur- 
ance to  cover  them  in  the  German  trade.  The  large 
field  of  British  private  companies  was  closed  to  them. 
Neutral  insurers,  in  so  far  as  they  participated  in 
the  war  risk  business,  confined  themselves  to  lesser 
risks  than  on  shipments  into  German}^  in  the  face 
of  the  attitude  England  was  exhibiting  toward  all 
such  commerce.  The  War  Risk  Insurance  Bureaus 
of  other  neutral  governments  than  our  own  were 
restricting  their  insurance  to  their  own  vessels 
engaged  in  the  home  trade.  They  had  no  intention 
of  insuring  shipments  between  America  and  Ger- 
many. 

Our  own  Government  War  Risk  Insurance  Bureau, 
established  in  September,  was  unfortunately  limited 
by  law  to  insuring  American  cargoes  in  American 
vessels,  under  the  pleasant  delusion  that  there  were 
enough  American  vessels  to  carry  the  cargoes  across 
the  sea. 

Other  neutral  vessels  being  eliminated  from  the 
American-German  trade  through  this  war  risk  insur- 


122   ECONOMIC  ASPECTS  OF  THE  WAR 

ance  difficulty,  only  American  vessels  remained. 
With  few  exceptions,  we  had  no  oversea  merchant 
carriers.  Most  vessels  flying  the  American  flag  were 
constructed  for  the  coastwise.  Gulf,  Carihbean  and 
Great  Lakes  trades.  They  were  not  fit  for  long 
transoceanic  voyages.  The  Government  Bureau 
offered  to  take  war  risk  insurance  on  these  vessels, 
but  required  first  that  they  get  their  marine  insur- 
ance elsewhere. 

Since  they  were  not  built  for  crossing  the  ocean — 
which  no  one  knew  better  than  the  insurance  men — 
the  small  American  steamers  had  a  long  fight  to  get 
this  marine  risk  insured.  It  is  not  the  custom  for  a 
single  insurer  to  assume  the  whole  risk  of  insuring  a 
vessel.  Such  a  risk  is  jointly  carried  by  a  number  of 
insurance  companies,  or  underwriters.  So  far  as 
oversea  insurance  is  concerned,  the  American  com- 
panies have  been  mere  participants  with  the  big 
English  companies  in  the  business.  The  Americans 
w^ere  unable  to  secure  English  aid  in  furthering  ship- 
ments to  Germany;  they  long  seemed  incapable  of 
carrying  those  risks  themselves. 

Finall}^,  so  Washington  claims,  the  American 
underwriters  were  forced  to  do  this  insuring  by  the 
threat  that,  if  they  did  not,  a  bill  would  be  intro- 
duced in  Congress  empowering  the  Government  War 
Risk  Insurance  Bureau  to  enter  the  marine  insurance 
field.  The  prospect  of  perhaps  permanent  govern- 
ment competition  was  too  much  for  the  American 
marine  companies.  They  shifted  to  British  insurers 
some  of  the  risks  that  they   (the  Americans)    were 


STARTING  COTTON  MOVEMENT      123 

carrying  on  English  and  neutral  business,  and  set 
free  part  of  their  own  resources  to  enable  them  to 
handle  German  trade.  The  rates  charged  on 
steamers  not  built  to  cross  the  ocean  were  naturally 
high. 

When  the  cotton  exporter  had  the  marine  risk  on 
his  American  vessel  covered,  he  turned  to  the  Gov- 
ernment War  Risk  Bureau  and  found  it  quite  inade- 
quate for  his  needs.  The  government  limited  the 
risk  on  any  one  bottom  to  $500,000,  hull  and  cargo 
included.  Even  under  normal  conditions  this  amount 
would  cover  only  a  very  modest  hull  and  cargo.  As 
the  demand  for  American  tonnac^e  had  brouojht  about 

o  try 

a  great  rise  in  its  value,  the  shipper  found,  after  he 
had  covered  the  value  of  his  vessel  in  the  Govern- 
ment War  Risk  Bureau,  that  the  margin  left  for 
the  cargo  was  insufficient.  There  were  occasions 
when  the  vessel  alone  was  valued  at  more  than  the 
government's  limit. 

Eventually  Washington  instituted  a  more  liberal 
pohcy  and,  in  some  cases,  the  insurance  limit  was 
increased  to  $1,000,000.  But  the  time  lost  in  get- 
ting this  limit  extended,  after  overcoming  the  other 
difficulties  described,  helped  hold  up  direct  shipments 
to  Germany  for  many  months.  The  first  American 
ship  in  this  trade  was  the  Greenbriar,  reaching 
Bremen  on  January  9,  1915.  She  was  followed  by 
others,  mostly  vessels  withdraw^n  from  the  coastwise 
trade.  The  high  marine  risk  charged  on  them  was 
shown  to  be  justified  when  one,  the  Denver  of  the 


124   ECONOMIC  ASPECTS  OF  THE  WAR 

Mallory  Line,  foundered  on  her  return  trip  from 
Germany. 

All  the  cotton  that  has  been  shipped  direct  to 
Germany  tlie  past  season  has  moved  in  these  Ameri- 
can steamers.  But  the  capacity  of  even  the  consider- 
able numbers  of  them  withdrawn  from  the  coastwise 
service  was  totally  inadequate  to  the  situation.  This 
is  illustrated  by  the  smallness  of  our  exports  to  Ger- 
many from  August  1  to  April  1 :  250,000  bales  com- 
pared with  2,250,000  bales  last  year  in  the  same 
period,  a  shortage  of  2,000,000  bales.  If  cotton  to 
Germany  had  moved  only  in  direct  shipments  in 
American  steamers,  the  movement  would  never  have 
afforded  the  relief  which  it  eventually  did  afford. 
There  w^ere  simply  too  few  American  ships  and  those 
who  knew  the  situation  promised  themselves  no  results 
of  value  from  the  elimination  of  insurance  difficulties 
that  forbade  even  these  few  ships  to  sail. 

The  fundamental  dearth  of  American  vessels  for 
this  German  cotton  trade  was  early  apparent  to  the 
government  at  Washington.  The  simple  way  to 
create  such  American  tonnage  was  to  buy  it  from 
foreigners  and  put  it  under  the  American  flag.  The 
obvious  tonnage  in  the  market  was  the  German,  tied 
up  inactive  in  American  ports.  All  other  ships  were 
on  the  seas  earning  such  rates  as  never  before;  no 
one  wanted  to  sell  them. 

American  laws  already  allowed  the  transfer  of 
foreign-built  vessels  to  the  American  flag,  within 
five  years  of  their  construction.  In  August,  1914, 
a  new  law  was  passed  removing  the  age  maximum 


STARTING  COTTON  MOVEMENT      125 

and  permitting  ships  so  entering  the  American  regis- 
try to  retain  their  foreign  officers.  Tliis  last  measure 
was  designed  to  remove  the  last  objection  to  such 
purchase,  in  the  mind  of  the  American  buyer. 

Yet  no  one  came  forward  to  buy  the  German  ships, 
or  any  others.  Nobody  felt  quite  sure  of  support  in 
exercising  his  right  to  purchase  belligerent  mer- 
chant ships  in  war  time  and  operate  them  under  the 
American  flag.  Everyone  could  count  on  the  active 
opposition  of  the  British  Government  to  such  pur- 
chase, an  opposition  only  too  plainly  indicated  in 
the  despatches  from  London.  Under  such  circum- 
stances the  American  buyer  of  a  German  ship  ran 
the  risk  of  purchasing  one  which  he  could  not  use 
when  purchased. 

Precisely  this  situation  was  created  for  the  buyer 
of  the  former  Hamburg-American  liner  Georgia.  In 
March  an  American  bought  this  steamer  after 
obtaining,  from  a  representative  of  Great  Britain, 
what  appeared  to  be  an  assurance  that  His  Majesty's 
Government  would  make  no  opposition  to  the  pur- 
chase and  operation  of  the  vessel,  provided  she  did 
not  run  in  the  German  trade.  She  was  bought  to 
run  to  the  West  Indies  and  South  America.  How- 
ever, with  the  vessel  bought  and  the  money  paid, 
the  British  Government  announced  that  it  would 
seize  the  ship  if  she  left  port.  The  buyer  had  a  ship 
he  could  not  sail. 

The  case  of  the  Dacia  is  better  known.  In  Decem- 
ber and  January  Senator  Walsh,  spokesman  for  the 
administration,    proved    to    the    satisfaction    of    the 


126  ECONOMIC  ASPECTS  OF  THE  WAR 

reading  public  that  there  was  nothing  in  interna- 
tional law  that  prevented  Americans  from  acquiring 
any  belligerent  merchant  vessel  they  chose,  provided 
the  purchase  were  bona  fide  and  the  transfer  abso- 
lute and  unconditional.  It  was  shown  that  Great 
Britain's  own  precedents  would  not  permit  her  to 
oppose  such  transfer.  There  was  considerable  mis- 
cellaneous criticism  of  American  citizens  for  neg- 
lecting to  seize  the  golden  opportunity  to  upbuild 
our  merchant  marine.  An  American,  Edward  N. 
Breitung,  tried  to  seize  it. 

Breitung  purchased  outright  the  Hamburg-Amer- 
ican steamer  Dacia,  which  lay  in  Port  Arthur,  Texas. 
He  hoisted  on  her  the  American  flag,  signed  an 
American  crew  and  American  officers,  and  loaded  her 
with  Texas  cotton  at  Galveston.  She  was  to  clear 
for  Bremen.  Evidence  was  submitted  of  the  validity 
of  the  transfer,  satisfactory  to  the  State  Department 
at  Washington. 

Great  Britain  announced  that  it  would  capture 
the  Dacia  if  she  sailed.  The  State  Department 
tried  to  induce  the  British  Government  to  let  the 
vessel  make  just  this  one  trip  to  Rotterdam,  Hol- 
land, the  Dacia's  original  destination  having  been 
altered  in  order  to  improve  her  chances  of  getting 
across.  His  Majesty's  Government,  being  by  this 
time  apparently  immune  against  our  communica- 
tions, could  not  see  its  way  clear  for  such  a  conces- 
sion. 

Yet  for  England  to  have  seized  the  Dacia,  In  the 
face  of  English  precedents  that  justified  just  such 


STARTING  COTTON  MOVEMENT      127 

transfers,  and  while  complications  of  other  kinds 
were  accumulating  in  the  diplomatic  relations  of 
that  country  and  America,  would  have  been  clearly 
impolitic.  It  happened  that  the  allied  French  Gov- 
ernment was  embarrassed  by  no  such  conditions, 
either  as  to  precedents  or  diplomatic  complications. 
In  fact  the  French  precedents  did  not  recognize  the 
validity  of  transfer  of  a  belligerent's  merchant  ves- 
sel during  war  time.*  So  England  allowed  a  French 
cruiser  to  capture  the  Dacia  and  tow  her  into  Brest. 
There  she  was  thrown  into  a  French  prize  court. 

In  view  of  the  reluctance  of  private  citizens  to 
create  American  tonnage,  the  administration  during 
the  early  months  of  the  war  determined  to  acquire 
the  necessary  ships  with  government  funds  and  to 
arrange  for  their  operation.  Two  reasons  were  be- 
hind this  measure.  One  of  these  was  a  desire  to  relieve 
the  distress  of  the  cotton  states  and  to  start  the  move- 
ment of  grain,  which  for  a  time  was  halted  by  lack 
of  ships.  One  reason  was  the  desire  of  the  Demo- 
cratic administration  to  call  into  life  an  American 
merchant  marine,  about  which  the  Republicans,  with- 
out practical  effect,  had  talked  and  agitated  for  so 
many  years. 

But  the  main  problem  was  to  get  cotton  moving 
into  Germany.  Since  private  citizens  had  failed  in 
their  attempt  to  acquire  ships  and  start  this  move- 
ment, the  task  seemed  to  many  an  appropriate  one 

*However,  the  Declaration  of  London,  under  which  England 
and  France  were  both  acting,  recognized  the  validity  of  such 
a  transfer  as  the  Dacia. 


128   ECONOMIC  ASPECTS  OF  THE  WAR 

for  the  government  itself.*  There  were  men  who 
supported  the  Ship  Purchase  Bill  on  this  ground, 
believing  that  it  would  put  the  government  in  posses- 
sion of  a  large  number  of  ships,  and  that  these  ves- 
sels would  be  at  the  service  of  the  South  for  the 
export  cotton  trade. 

Had  the  administration  been  entirely  frank  with 
the  public,  the  bill  might,  quite  probably,  have 
passed.  In  such  case,  government-owned  ships  with- 
out interruption  would  have  carried  cotton  and  food 
to  Germany,  bringing  back  dyes,  potash,  and  other 
German  imports.  The  British  so-called  "blockade" 
would  never  have  been  established  against  such  a 
government  line. 

The  bill  was  projected  in  August  and  September 
of  1914.  It  provided  for  a  corporation  in  which 
the  American  Government  was  to  be  the  main  stock- 
holder. The  corporation  was  to  have  $40,000,000 
at  its  disposal,  available  for  purchasing  ships.  It 
was  claimed  that  the  ships  were  needed  to  carry 
American  products  to  market.  What  ships,  what 
products,  what  market,  were  not  specified.  Yet 
everyone  knew  that  the  market  that  called  for  our 
product  was  Geraiany,  that  the  product  that  chiefly 
required  American  ships  to  carry  it  was  cotton,  and 
that  the  ships  available  for  purchase  were  the 
interned  German  steamers. 

For  two  main  reasons  England  was  opposed  to 
the  bill.     In  the  first  place,  the  purchase  of  German 

*See  Minority  Report  of  the  Merchant  Marine  Committee 
of  the  U.  S.  Chamber  of  Commerce,  Appendix,  p.  322. 


STARTING  COTTON  MOVEMENT      129 

steamers  would  have  created  in  this  country  credits 
available  for  purchases  by  Germany.  More  impor- 
tant than  that,  the  British  Government  could  not 
have  continued  to  exercise  against  a  line  backed  by 
the  United  States  the  "economic  pressure"  which 
they  had  been  exerting,  and  which  they  proposed  to 
exert,  on  Germany. 

The  British  opposition  to  government  purchase 
of  German  interned  vessels  was  manifested  in  the 
despatches  from  London  and  in  unofficial  warnings 
at  Washington.  Eloquent  Republican  senators  de- 
nounced the  Ship  Purchase  Bill  as  likely  to  involve 
us  in  a  war  with  England,  and  in  their  speeches 
solemnly  referred  to  the  warnings  from  London. 
The  administration  itself  was  confused. 

Very  possibly  the  country  would  have  stood  behind 
the  administration  if  it  had  said : 

"The  South  is  prostrate.  Cotton  is  20  cents  in 
Bremen  and  6  cents  in  Augusta.  Germany  is  ready 
to  take  large  quantities  off  the  southern  market  and 
relieve  the  situation.  It  happens  that  we  must  have 
American  sliips  to  get  that  cotton  through.  We 
propose  to  buy  them,  and  to  buy  them  where  we  can 
get  them  cheapest  and  quickest,  put  them  under  the 
American  flag  and  send  them  full  of  cotton  to 
Germany." 

Unfortunately  nothing  of  this  sort  was  done. 
Intentions  were  veiled  until  no  one  knew  what  was 
intended.  The  word  Germany  was  taboo,  either  as 
a  market  to  be  sought  or  as  a  source  for  ships. 
People  in  Washington  spoke  of  buying  English  and 


130   ECONOMIC  ASPECTS  OF  THE  WAR 

neutral  ships.  It  was  specifically  said  that  no  ships 
would  be  bought  that  would  involve  us  in  any  diffi- 
culty with  the  belligerents.  Officials  spoke  generally 
of  running  the  ships  "wherever  needed,"  particularly 
to  South  America,  to  develop  our  trade  there. 

As  to  buying  other  than  German  vessels,  how- 
ever, England  and  many  neutral  countries  put 
embargoes  on  the  sale  of  their  merchant  ships  away 
from  the  home  flag;  so  that  proposition  was  a  futile 
one.  And  South  America,  as  was  easily  pointed  out, 
was  in  no  shape  to  have  its  trade  with  us  developed. 
That  continent  found  itself  unable  to  sell  to  a  large 
part  of  Europe,  and  hence  was  unable  to  buy  from 
us  or  anyone  else.  Vessels  in  the  regular  lines  to 
South  America  were  sailing  out  of  New  York  only 
half  loaded. 

That  is,  the  administration  seemed  to  be  asking 
for  these  ships  from  an  impossible  source,  to  insti- 
tute South  American  services  which  were  unneces- 
sary and  superfluous.  If  this  was  the  real  purpose 
of  the  Ship  Purchase  Bill,  no  money  should  have 
been  voted  for  it.  If  it  had  some  other  purpose,  that 
purpose  ought  to  have  been  declared.  Under  our 
apparent  concern  for  the  displeasure  of  England, 
the  bill  had  become  a  measure  to  buy  ships  nowhere 
in  particular  and  run  them  everywhere  in  general. 
It  was  on  this  rock  that  the  project  foundered  after 
a  stormy  contest  in  the  Senate  that  carried  through 
most  of  January  and  February. 

It  has  been  seen  that  American  ocean-going  ships 
were  necessary  to  carry  cotton  to  Germany.    Private 


STARTING  COTTON  MOVEMENT      131 

individuals  failed  to  acquire  such  ships  and  the 
attempt  to  acquire  them  by  public  action  failed. 
Long  before  this  result  had  been  worked  out  in  the 
sensational  Republican  filibuster  in  the  Senate,  the 
real  cotton  shippers  gave  up  hope  of  ever  getting 
much  cotton  into  Germany  direct,  and  bent  their 
efforts  towards  starting  the  movement  to  Germany 
via  neutral  ports,  in  neutral  ships. 

England  met  this  contingency  by  two  means. 
One  of  these  was  to  urge  the  neutral  countries  adja- 
cent to  Germany  to  place  re-export  embargoes  on 
cotton,  such  as  they  had  placed  on  many  other  arti- 
cles, under  virtual  compulsion  from  England.  The 
second  means  was  the  fear  created  in  the  minds  of 
the  shippers  that  cotton  might  be  declared  contra- 
band;  and  this  fear  interfered  with  its  shipment  to 
Germany  via  all  neutral  countries. 

Pressure  designed  to  compel  re-export  embargoes 
was  first  exerted  on  neutral  Holland.  In  the  first 
days  of  the  war  the  Netherlands  Government  placed 
a  re-exportation  embargo  on  cotton,  and  the  ban 
was  never  removed  until  January  9,  1915.  This 
meant  that  the  natural  way  into  Germany  was 
barred :  the  route  through  Holland  and  up  the  Rhine. 
In  times  of  peace  much  of  West  Germany  is  so 
suppHed  from  the  oversea  world,  since  Rotterdam, 
at  the  mouth  of  the  Rhine,  is  in  Dutch  hands. 

Another  neutral  country  which  maintained  an 
embargo  for  a  considerable  period  was  Italy.  The 
other  "adjacent  neutrals"  at  first  refused.,  They 
contended  for  the  right  of  their  merchants  to  for- 


132  ECONOMIC  ASPECTS  OF  THE  WAR 

ward  cotton  to  Germany,  since  cotton  was  on  the 
"free  list"  of  the  Declaration  of  London,  according 
to  which  England — barring  certain  modifications — 
professed  to  be  acting. 

That  England  sought  deliberately  to  prevent  cot- 
ton from  moving  to  Germany  via  the  neutral  coun- 
tries by  fostering  rumors  that  cotton  was  likely  at 
any  moment  to  be  declared  contraband,  cannot  be 
denied.  The  fear  of  such  an  event  was  such  a  potent 
influence  in  banking  and  insurance  circles  that  it 
made  cotton  exports  very  difficult.  No  one  knew 
that  cotton  might  not  be  peremptorily  declared  con- 
traband, as  copper  had  been,  while  cargoes  were 
in  mid-ocean.  What  the  situation  called  for  was 
clear.  A  definite  declaration  from  England  was 
needed,  to  the  effect  that  cotton  was  not  and  would 
not  be  considered  contraband  of  war. 

In  the  latter  half  of  September  and  early  October, 
attempts  were  made  to  have  our  government  get 
such  a  declaration  from  England.  If  the  State 
Department  made  an  effort  in  this  direction,  the 
effort  was  not  successful.  Shippers  who  pressed  for 
the  declaration  received  at  Washington  the  answer 
that  it  would  be  an  affront  to  ask  England  to  make 
such  a  statement.  Was  not  cotton  on  the  "free  list" 
of  the  Declaration  of  London,  and  was  not  His 
Majesty's  Government  guiding  itself  by  the  prin- 
ciples of  that  Declaration,  with  certain  exceptions 
that  did  not  affect  cotton.?  Therefore,  shfp  cotton 
freely. 

To  remove  the  last  vestige  of  apprehension,  Solici- 


STARTING  COTTON  MOVEMENT      133 

tor  Cone  Johnson,  of  the  State  Department,  issued 
on  October  10  the  following  statement  of  his  per- 
sonal opinion  as  to  the  ease  with  which  cotton  could 
move  to  Germany: 

"There  is  no  impedient  to  the  shipment  of  cotton 
to  any  country,  not  excepting  the  belligerents.  Cot- 
ton is  non-contraband,  for  the  manifest  reason  that 
in  its  raw  state  it  cannot  be  used  for  the  purposes 
of  war.  In  order  to  be  available  for  use  by  armies 
and  navies,  or  forces  of  the  belligerents,  it  has  first 
to  undergo  a  long  process  of  manufacture.  It  is 
ranked  as  a  non-contraband  in  the  London  Conven- 
tion. 

"Of  course  shipments  of  cotton  to  foreign  coun- 
tries, if  they  are  to  escape  detention,  must  be  shipped 
in  American   or  other  vessels   flying  neutral  flags. 
There  is  no  legal  impediment  to  a  shipload  of  cotton 
going    direct    to    Hamburg    consigned    to    German 
spinners,  and,  personally,  I  hope  to  see  the  expor- 
tation of  cotton  to  the  countries   at  war  increase*.^ 
The  English  give  preference,  I  understand,  to  Egyp-  !j, 
tian  cotton,  but  other  countries  at  war,  no  doubt,  are  \ 
in  need  of  raw  cotton.    Apparently  the  American  cot-  ? 
ton  interests  should,  if  they  have  not  already  done 
so,  seek  out  these  markets." 

The  solicitor's  optimism  did  not  infect  the  cotton 
trade  or  start  the  cotton  movement.  He  was  right 
in  believing  that  England  was  preferring  Egyptian 
cotton,  and  that  there  was  a  market  for  American 
cotton  in  belligerent  countries  other  than  England. 
He  seemed  to  underestimate  the  subtle  difficulties 
in  reaching  that  market.  The  trade  waited  for 
assurance  from  someone  more  closely  in  touch  than 


134   ECONOMIC  ASPECTS  OF  THE  WAR 

the  solicitor  with  the  practices  and  purposes  of  His 
Majesty's  Government. 

That  the  absence  of  a  definite  British  declara- 
tion that  cotton  was  to  be  considered  non-contra- 
band had  prevented  export  shipments  from  moving 
even  for  neutral  consumption,  is  made  clear  by  a 
telegram  of  the  president  of  the  New  York  Chamber 
of  Commerce  to  Mr.  Bryan  on  October  24.  It 
repeated  the  reports  that  the  Allies  had  announced 
cotton  for  Germany  and  Austria  as  on  their  pro- 
hibited list  and  had  warned  vessels  trading  with 
Scandinavia,  Holland  and  Italy  against  carrying 
cotton  for  Germany  or  Austria. 

Therefore,  the  telegram  read,  even  shipments  to 
neutral  countries  were  in  danger.  They  might  be 
brought  before  a  British  prize  court  and  have  to 
establish  their  innocency ;  yet  no  one  had  been  told 
what  proofs  of  innocency  would  be  satisfactory. 
Therefore,  it  went  on,  neither  shippers  nor  insur- 
ance companies  dared  handle  trade  for  neutral 
countries,  to  say  nothing  of  Germany.  The  whole 
cotton  trade  was  represented  to  be  in  a  serious  pre- 
dicament. The  message  then  asked  that  Great  Brit- 
ain be  requested  to  give  some  authoritative  state- 
ment of  its  attitude,  both  with  regard  to  shipments 
destined  to  neutrals  and  shipments  destined  to 
Germany  and  Austria. 

Indeed  there  was  need  for  relief.  Through  Sep- 
tember and  October,  cotton  had  been  passing  out 
of  the  producer's  hands  at  a  price  of  six  cents  per 
pound.       Speaking    broadly,    the     small    southern 


STARTING  COTTON  MOVEMENT      135 

farmer  has  been  for  years  in  a  state  of  near  eco- 
nomic slavery.  He  lives  on  credit.  When  the  cotton- 
planting  season  comes,  the  general  store  gives  the 
farmer  on  credit  the  seeds,  fertihzer  and  implements 
he  needs.  During  the  growing  season  it  advances 
him  clothing  and  food  for  his  family.  The  under- 
standing is  >that  the  debt  will  be  paid  when  the  cotton 
is  harvested.  It  is  frequently  paid  by  direct  dehvery 
of  cotton  to  the  store,  where  the  farmer  is  credited 
at  the  current  cotton  price. 

So  in  September  and  October  of  1914,  when  the 
current  price  was  six  cents,  the  farmer  could  not 
hold  his  product  until  better  times  came.  He  was 
in  debt ;  he  was  living  on  credit ;  and  unless  he  turned 
his  cotton  in,  his  credit  would  be  cut  off  and  he  would 
be  in  positive  want.  The  storekeeper  had  his  bills 
and  notes  to  meet  also ;  and  he,  too,  generally  had  to 
sell  the  cotton  at  once  for  what  it  would  bring. 

It  cannot  be  denied  that  there  are  large  farmers 
in  the  South  who  are  financially  independent  and 
capable  of  holding  back  their  product.  Some  did 
hold  it  back.  But  even  of  those  who  could  carry 
the  cotton,  there  was  many  a  cautious  spirit  who  did 
not  care  to  take  the  risk  of  cotton  going  still  lower 
than  the  six-cent  level  which  it  reached.  These  men 
sold  at  eight  and  seven  or  six  and  one-half  cents 
when  they  saw  cotton  falhng,  and  later  congratu- 
lated themselves  on  having  gotten  off  so  well. 

Shippers  were  pressing  the  State  Department  to 
give  them  the  true  remedy  for  the  evil  times  in  the 
South, — ^the  remedy  that  worked  when  appHed.     In 


136  ECONOMIC  ASPECTS  OF  THE  WAR 

the  meantime,  the  country  was  full  of  nostrums 
for  the  malady.  There  was  talk  of  the  government 
buying  the  entire  cotton  crop  and  holding  it.  There 
was  formed  a  cotton  pool  loan  fund,  which  bound 
northern  banks  to  help  out  their  southern  confreres, 
but  little  of  the  fund  was  ever  used.  The  President 
headed  the  *'buy-a-bale"  movement.  The  daughter 
of  the  Speaker  of  the  House  of  Representatives 
planned  a  "national  cotton  goods  bargain  day." 

The  final  sacrifice  of  patriotic  devotion  was  made 
by  the  august  judges  of  the  Mississippi  Supreme 
Court,  who,  according  to  news  despatches  from  Jack- 
son, of  October  26,  held  court  clad  in  overalls  and 
cotton  shirts,  while  the  lawyers  argued  in  the  same 
garb.  The  function  was  reported  to  be  part  of  a 
local  "cotton  day,"  in  furtherance  of  the  "wear 
cotton  clothes  movement"  in  the  South.  War,  as 
General  Sherman  said,  is  Indeed  hell. 

While  the  learned  judges  were  doing  their  best, 
those  who  had  studied  the  export  situation  were 
applying  other,  and  more  effective,  remedies.  Dis- 
couraged at  the  failure  of  their  efforts  through  the 
State  Department,  the  southern  senators  finally 
turned  to  the  British  Government  direct.  On  October 
22,  Senator  Hoke  Smith,  of  Georgia,  Introduced  In 
the  Senate  a  resolution  providing  for  the  appoint- 
ment of  a  committee  of  five  senators  to  look  Into  the 
matter  of  facilitating  shipments  abroad.  The  reso- 
lution was  passed  and  the  President  of  the  Senate 
appointed  Senators  Smith,  of  Georgia;  Vardaman, 
of  Mississippi;  Smith,  of  South  Carolina;  Jones,  of 


STARTING  COTTON  MOVEMENT      137 

Washington;  and  Smith,  of  Michigan.  The  next 
day  this  committee  was  in  touch  with  the  State 
Department  and  the  British  Ambassador.  The 
committee  seemed  to  galvanize  the  British  Govern- 
ment into  action. 

To  have  refused  the  southern  senators  would  have 
meant  legislation  to  enforce  their  demands  (possibly 
an  embargo  on  the  exportation  of  something  Eng- 
land wanted)  ;  for  the  South  at  that  time  still  held 
the  whip  hand  in  Congress.  No  one  knew  this  better 
than  the  British  Government.  And  there  were  mur- 
murings  also  from  the  great  textile  centers  in  New 
England  and  the  Atlantic  states,  for  the  manufac- 
turers had  been  told  by  Germany  that  if  they  desired 
the  German  dyestufFs  vital  to  their  industries  it 
would  be  necessary  to  send  cotton  cargoes  to  pay 
for  them. 

Under  the  pressure  thus  exerted  the  British  au- 
thorities gave  way.  On  October  26,  the  following 
letter  was  addressed  by  the  British  Embassy  to  Mr. 
Lansing,  Acting  Secretary  of  State: 

"The   British   Embassy,   Washington,    October   26, 
1914. 

"Dear  Mr.  Counsellor:  In  compHance  with  your 
request,  I  telegraphed  on  the  twenty-third  instant 
to  my  government  to  inquire  what  was  their  view 
with  regard  to  cotton  and  whether  or  not  they  con- 
sidered it  to  be  contraband.  You  addressed  this 
question  to  me,  as  you  said  there  seemed  to  be  doubts 
in  certain  quarters  in  this  country  as  to  the  attitude 
of  my  government. 


138   ECONOMIC  ASPECTS  OF  THE  WAR 

"Last  night  I  received  a  reply  from  Sir  Edward 
Grey,  in  which  he  authorizes  me  to  give  the  assur- 
ance that  cotton  will  not  be  seized.  He  points  out 
that  cotton  has  not  been  put  in  any  of  our  lists  of 
contraband,  and,  as  your  Department  must  be  aware 
from  the  draft  proclamation  now  in  your  possession, 
it  is  not  proposed  to  include  it  in  our  new  list  of 
contraband.  It  is,  therefore,  as  far  as  Great  Britain 
is  concerned,  in  the  free  list,  and  will  remain  there. 
I  am,  dear  Mr.  Counsellor, 

"Yours  sincerely, 

"Cecil  Spring-Rice." 


By  this  same  declaration,  the  heavy  restrictions 
on  the  export  of  cotton  to  neutral  countries  of 
Europe,  as  well  as  to  Germany,  were  also  removed. 
No  one  had  felt  safe  shipping  to  .these  countries  so 
long  as  there  was  danger  that  England  would  de- 
clare cotton  contraband.  England  had  been  detain- 
ing conditional  contraband  like  meat  and  copper 
destined  for  neutral  countries  and  neutral  consump- 
tion on  the  pretext  that  the  goods  might  be  en 
route  to  Germany.  No  compensation  was  in  sight 
for  the  cargoes  detained  and  still  unloaded. 

When  the  British  declaration  was  once  made,  cer- 
tain officials  in  Washington  were  quick  to.  see  its 
political  value.  Not  one,  but  five  or  ten  of  them 
will  each  admit  that  he  was  the  one  responsible  for 
getting  the  export  cotton  movement  started.  In 
the  Senate,  on  December  21,  Senator  Walsh  delivered 


STARTING  COTTON  MOVEMENT      139 

the   most    complete    commentary   on    the    glory    for 
which  they  were  competing.    He  said : 

"I  have  not  dwelt  on  the  just  causes  of  complaint 
given  to  our  shippers  of  foodstuffs  and  cotton  to 
neutral  ports.  I  know  nothing  of  them  in  detail,  but 
I  do  know  that  there  never  was  a  day  when  shipments 
of  cotton  from  our  shores  to  any  port  should  have 
been  interrupted,  save  for  the  want  of  vessels  in 
which  to  carry  it,  and  there  is  no  achievement  in  any 
arrangement  by  which  they  have  been  finally  per- 
mitted to  move.  No  blockade  has  ever  been  declared, 
and  yet  it  is  notorious  that  such  cotton  as  goes  to 
Germany,  goes  with  the  permission  of  England." 


CHAPTER  VIII 
Stopping  the  Cotton  Movement 

After  the  British  Embassy's  letter  of  October  26 
to  Mr.  Lansing,  England  seemed  under  definite  obli- 
gations not  to  interfere  with  our  cotton  exports  to 
the  Continent.  But  we  were  to  learn  that  the  hin- 
drances were  by  no  means  at  an  end.  On  October  30, 
four  days  after  the  note  of  Sir  Cecil  Spring-Rice  to 
Mr.  Lansing,  Denmark  for  some  reason  declared  an 
embargo  on  the  exportation  of  cotton.  This  closed 
the  route  to  Germany  via  Copenhagen  which,  after 
Rotterdam — a  route  already  closed — was  the  most 
natural  entrance  into  Germany  through  an  adjacent 
neutral. 

Moreover,  while  England's  position  as  to  cotton 
was  now  on  record,  it  was  also  important  that  assur- 
ance should  be  had  from  France.  In  general,  that 
country  joins  England  in  such  communications.  In 
this  case,  however,  by  some  unexplained  circum- 
stance. Secretary  Bryan  was  not  able  until  December 
17  to  announce  that  France  also  would  not  consider 
cotton  contraband. 

When  cotton  for  Germany  direct  finally  started 
moving,  not  the  least  of  the  grievances  of  our  cotton 
trade  was  the  extraordinary  rigidity  of  the  British 
Government  with  respect  to  precautions  against  sus- 


STOPPING  COTTON  MOVEMENT      141 

pected  concealment  of  contraband  in  cotton  cargoes. 
It  was  a  sufficient  tax  upon  the  patience  and  resources 
of  cotton  exporters  that  German-bound  cargoes 
should  be  submitted  to  the  examination  of  English 
consuls,  the  process  in  some  cases  including  even  the 
sealing  of  the  vessel's  hatches  by  these  officials.  Even 
this  gave  no  assurance  that  the  ships  would  not  be  de- 
tained and  searched  by  British  cruisers.  The  con- 
sular certificate  and  the  British  seal  on  the  hatches  of 
ships  were  considered  as  merely  partial  proof  that 
cargoes  contained  only  cotton. 

The  further  suggestion  was  made  by  England  that 
it  would  be  a  valuable  precaution  against  the  possi- 
bility of  detention  and  search  if  shippers  would  have 
the  cotton  bales  photographed  by  X-ray  process  and 
the  photographs  sent  along  with  the  British  consul's 
certificate  as  additional  evidence  that  the  cotton 
contained  no  contraband.  The  first  of  these  photo- 
graphic seances  took  place  December  25  at  a  pier 
in  New  York  in  behalf  of  the  cargo  of  the  City  of 
Macon,  an  American  coastwise  steamer  bound  for 
Bremen.  All  this  was  of  course  at  the  cost  of  the 
shippers. 

But  the  most  serious  difficulty  with  a  free  cotton 
movement  is  to  be  found  in  still  another  episode  of 
the  period.  On  October  27,  one  day  after  the  State 
Department  had  published  the  note  of  the  British 
Ambassador,  the  British  Admiralty  alleged  that  the 
Germans  had  laid  mines  in  the  waters  north  of  Ire- 
land. On  October  29  the  further  news  came  from 
England  that  this  measure  on  the  part  of  Germany 


142   ECONOMIC  ASPECTS  OF  THE  WAR 

might  cause  England  to  close  the  North  Sea  to 
shipping. 

On  November  2  the  British  Government  declared 
the  whole  North  Sea  a  military  area,  mined  and 
dangerous  for  navigation.  It  was  stated  that  mer- 
chant craft  of  all  kinds  would  there  be  exposed  to  the 
gravest  dangers  excepting  as  they  followed  the 
specific  sailing  directions  of  the  Admiralty.  Though 
this  announcement  was  not  issued  until  November  2, 
the  Admiralty  disclaimed  responsibility  for  acci- 
dents after  November  5.  All  vessels  trading  to  and 
from  Scandinavian  countries  and  Holland  were  in- 
structed to  come,  if  inward  bound,  via  the  English 
Channel  and  the  Straits  of  Dover,  whence  they  would 
be  directed  up  the  east  coast  of  England  and  thence 
to  destination.* 

It  will  be  noted  that  no  directions  are  given  for 
getting  through  to  Germany.  This  mining  of  the 
North  Sea  had  the  effect  of  terrorizing  the  owners  of 
American  ships  who  were  approached  with  regard 
to  chartering  of  their  vessels  for  cotton  exports  to 
Germany.  It  had  a  similar  effect  on  the  insurance 
men  approached  to  insure  such  boats.  As  a  result, 
the  first  American  ship  sailed  for  Bremen  about  the 
middle  of  December,  though  the  British  passport  for 
cotton  had  been  issued  October  26.    The  requirement 

*  Amsterdam  despatches  reported  that,  up  to  March  10, 
floating  contact  mines  had  been  taken  up  and  rendered  harm- 
less along  the  Dutch  coast  to  the  number  of  378.  Of  these, 
214  were  of  British  origin,  22  German,  33  French,  and  109 
unknown. 


STOPPING  COTTON  MOVEMENT      143 

that  all  vessels  for  Holland  and  Scandinavia  should 
pass  through  the  English  Channel,  simplified  the 
British  practice  of  seizing,  examining  and  detaining 
this  traffic. 

All  this  while,  the  British  Cabinet  was  congratu- 
lating Great  Britain  on  the  success  of  the  "economic 
pressure"  applied  to  Germany.  At  a  London  ban- 
quet for  the  Lord  Mayor  on  November  9,  the  Right 
Honorable  Winston  Churchill,  First  Lord  of  the 
Admiralty,  declared  that  the  economic  pressure — 
Churchill  invented  the  phrase — brought  about  by 
the  naval  blockade,  would  ultimateh^  spell  the  doom 
of  Germany  as  certainly  as  winter  struck  the  leaves 
from  the  trees.  On  November  27  in  parliament  he 
announced:  "The  economic  pressure  on  Germany 
continues  to  develop  in  a  healthy  and  satisfactory 
manner." 

It  is  interesting  to  see  his  Lordship  even  as  early 
as  November  9  speaking  of  the  "naval  blockade"  of 
Germany.  Then,  as  now,  the  British  authorities  were 
exercising  by  indirection  the  rights  of  blockade 
without  undertaking  its  responsibilities. 

Yet  Great  Britain  has  successively  denied  account- 
ability for  any  distress  of  the  American  cotton  trade. 
In  the  British  communication  dated  February  10, 
the  second  answer  to  our  December  26  protest,  is 
found  the  following : 

"Any  decrease  in  American  exports  which  is  attrib- 
utable to  the  war  is  essentially  due  to  cotton. 
Cotton  Is  an  article  which  cannot  possibly  have  been 
affected  by  the  exercise  of  our  belligerent  rights,  for, 


144  ECONOMIC  ASPECTS  OF  THE  WAR 

as  your  Excellency  is  aware,  it  has  not  been  declared 
by  His  jMajesty's  Government  to  be  contraband  of 
war,  and  the  rules  under  which  we  are  at  present 
conducting  our  belligerent  operations  give  us  no 
power  in  the  absence  of  a  blockade  to  seize  or  inter- 
fere with  it  when  on  its  way  to  a  belligerent  country 
in  neutral  ships.  Consequently  no  cotton  has  been 
stopped." 

The  point,  of  course,  was  that  England's  pressure 
upon  cotton  had  been  exercised  so  early  in  the  course 
of  its  movement  that  for  months  it  never  got  far 
enough  to  have  a  chance  to  be  stopped  by  British 
cruisers. 

While  the  economic  pressure  upon  Germany  was 
the  purpose  of  England's  measures,  British  mer- 
chants were  by  no  means  averse  to  taking  advantage 
of  the  depressed  cotton  prices  brought  about  by  the 
stagnant  market  in  the  South,  and  buying  their  1915 
supply  at  famine  rates.  Of  the  heavy  stock  of  cotton 
carried  in  the  South  during  the  cotton  year  1914- 
1915,  a  considerable  proportion  was  in  the  hands  of 
persons  who  carried  it  for  British  importers  and 
spinners.  Some  German  buyers,  as  well,  profited  by 
the  opportunity  offered  them,  buying  cotton  to  hold 
pending  favorable  conditions  for  shipment. 

Such  circumstances  as  these  elicited  a  fiery  out- 
burst from  Governor  Colquitt  of  Texas.  Great 
Britain  had  bought  her  cotton  low  after  depressing 
the  price,  he  said.  The  business  of  the  South,  he 
declared,  was  prostrated,  its  credit  was  impaired, 
and  thousands  of  its  people  were  starving.     He  pro- 


STOPPING  COTTON  MOVEMENT      145 

posed    sending   "American    ironclads    to    England's 
door"  to  enforce  our  rights. 

Significant  of  the  southern  feeling  was  the  adop- 
tion of  the  following  resolution  by  the  State  Farmers' 
Union  of  Louisiana  :* 

"Whereas  the  cotton  farmers  of  the  nation  are 
suffering  from  the  worst  depression  that  has  over- 
taken this  country  since  1860,  and  the  business  inter- 
ests are  correspondingly  affected  in  common  with  the 
farmer;  and 

"Whereas,  taking  the  European  War  as  an  excuse, 
England  placed  such  restrictions  on  the  exporting  of 
cotton  from  the  United  States  that  it  caused  a  ruin- 
ous decline  in  the  price  of  cotton,  owing  to  our  in- 
ability to  ship  it  to  our  customers  in  foreign  coun- 
tries, and  England  did  not  relax  her  interference 
with  the  shipment  of  cotton  until  her  subjects  had 
practically  bought  a  year's  supply  of  cotton  at  about 
six  cents  per  pound  from  our  farmers,  who  were 
forced  to  sell  in  order  to  exist ;  and 

"Whereas  the  waters  of  the  seas  are  the  only  means 
of  carrying  the  commodities  interchanged  between 
the  various  nations  of  this  earth ;  and 

"Whereas  great  injustice  resulted  from  the  efforts 
of  some  nations  to  interfere  with  the  untrammeled 
and  free  use  of  the  interchange  of  commodities  of  all 
kinds  and  interchange  of  intelligence ;  so  be  it 

"Resolved  by  the  Louisiana  State  Farmers'  Edu- 
cational and  Co-operative  Union  of  America,  that 
we  hereby  pledge  ourselves  to  do  all  in  our  power  to 
obtain  for  ourselves  and  our  fellow  citizens  and  man- 
kind generally,  the  freedom  and  unhindered  use  of 

*  Reprinted  in  Congressional  Record,  February  3,  1915,  pp. 
3232-3233. 


146   ECONOMIC  ASPECTS  OF  THE  WAR 

the  seas  and  of  the  air,  and  we  hereby  respectfully 
petition  our  Federal  Government  to  give  due  notice 
to  all  nations,  in  view  of  the  losses  sustained  by  the 
people  of  these  United  States,  that  in  future  we 
henceforth  shall  ship  all  of  our  products  at  all  times 
and  to  our  customers  in  any  nation  just  as  in  the 
past ;  that  this  nation,  being  neutral,  will  not  favor 
one  over  the  other,  but  will  treat  all  alike,  as  it  ought 
to  do,  but  that  our  government  proposes  to  send  its 
own  sliips,  under  its  own  flag,  with  the  products  of 
its  own  citizens,  to  its  customers  in  any  nation  on 
earth,  and  will  brook  interference  from  no  one  in 
protecting  the  rights  and  the  property  and  trade 
relations  of  its  own  people." 

We  have  seen  that,  in  the  face  of  all  difficulties, 
cotton  in  good  volume  did  get  moving  to  Germany, 
via  neutral  countries,  during  November.*  In  a  pre- 
vious analysis  of  the  movement  it  was  assumed  that 
most  of  the  exports  to  Italy,  Holland  and  Scandi- 
navia in  excess  of  their  takings  in  1913  may  fairly 
be  credited  with  German  destination.  In  November 
1,000  bales  cleared  for  Germany  direct;  the  indirect 
exports  via  neutral  countries  were  approximately 
143,000  bales.  In  December  47,000  bales  cleared  for 
Germany  by  the  direct  route,  and  263,000  bales  by 
the  indirect.  In  January  100,000  bales  moved  di- 
rectly, no  less  than  423,000  indirectly,  to  Germany. 
In  February  89,000  bales  were  exported  by  the  direct 
and  some  458,000  by  the  indirect  route.  In  March 
6,000  bales  cleared  for  Germany,  while  the  excess 
movement  to  neutral  countries  was  370,000  bales. 

*See  table  on  p.  117. 


STOPPING  COTTON  MOVEMENT      147 

The  effect  of  this  movement  was  seen  in  advancing 
cotton  prices.  On  November  16  the  New  York 
Cotton  Exchange  reopened,  fifteen  weeks  from  the 
date  of  closing.  In  the  initial  trading,  spot  cotton 
was  quoted  at  7.75  cents  per  pound.  From  then 
until  Christmas  the  price  varied  between  7.35  and 
7.75  cents.  On  the  day  after  Christmas  the  price 
was  7.60  and  on  January  4  passed  8  cents.  During 
the  second  half  of  January  it  reached  8.50  cents.  At 
that  point  it  held  until  March  5,  when  a  gradual  rise 
began  which  carried  the  price  up  to  9  cents  on 
March  20. 

The  great  British  and  German  takings  had  braced 
the  market.  The  relief  was  cumulative,  and  in  spite 
of  the  British  blockade  action  on  March  1,  the  price 
advanced  to  10  cents  on  April  9  and  to  a  maximum 
of  10.60  on  April  24. 

Yet  from  the  day  when  Britain  made  an  exception 
in  favor  of  cotton  and  allowed  us  to  ship  it  to  Ger- 
many, there  were  English  voices  that  protested 
against  the  exception.  For  some  time  no  real  excuse 
for  interfering  with  the  movement  could  be  found. 
The  first  one  offered  came  from  Sir  William  Ramsay 
who,  at  the  end  of  January,  1915,  wrote  the  London 
Times  advocating  the  placing  of  cotton  on  the  abso- 
lute contraband  list  and  pointing  out  that  nitro- 
cotton  is  an  ingredient  of  all  modern  powder. 

"If  copper  lies  under  an  embargo,  cotton  a  fortiori 
should  be  prohibited.      To   place  it   on  the  list   of 


148   ECOxXOMIC  ASPECTS  OF  THE  WAR 

contraband  of  war  is  a  necessity,  unless  the  whole 
theory  of  contraband  is  given  up."* 

If  Sir  William  was  following  the  successive  British 
contraband  lists  he  must  have  known  that  his  govern- 
ment was  by  no  means  sacrificing  the  whole  theory  of 
contraband.  But  the  inclusion  of  cotton  in  the  list 
was  not  so  simple  as  it  looked. 

In  the  first  place,  great  American  interests  were 
at  stake.  In  view  of  these,  the  London  Daily  Mail 
advised  against  the  Ramsay  proposal,  and  declared 
that  Germany  already  had  enough  cotton  for  mili- 
tary purposes.  The  Mail  suggested  that  America 
might  retaliate  by  putting  an  embargo  on  ammuni- 
tion exports  to  England. 

Moreover,  the  main  uses  of  cotton  are  so  far  re- 
moved from  the  purposes  of  war  that  to  declare  it 
absolute  contraband  would  be  an  affront  to  inter- 
national intelligence.  It  would  be  a  particularly 
drastic  violation  of  the  Declaration  of  London,  where 
the  common  sense  of  mankind  had  been  expressed  in 
putting  cotton  on  the  free  list.     And  it  was  British 

*  British  scientists  seem  not  to  agree  as  to  the  importance 
of  cotton  in  the  making  of  explosives.  On  July  16  W.  F. 
Reid,  formerly  president  of  the  Society  of  Chemical  Industry, 
addressed  that  society  in  London.  Apparently  referring  to 
Ramsay,  he  said: 

*'There  is  practically  no  cotton  used  in  the  manufacture  of 
high  explosives.  The  whole  thing  is  a  great  fraud.  There  may 
be  some  trace  of  cotton  in  the  explosive  but  the  bulk  of  it  is 
coal  products.  Eminent  scientists  have  made  erroneous  state- 
ments on  this  subject.  If  people  associated  with  science  would 
speak  only  on  the  branches  with  which  they  are  connected,  the 
advantages  would  be  very  great." 


STOPPING  COTTON  MOVEMENT      149 

representatives  who  at  the  London  Conference  in- 
sisted upon  including  cotton  in  this  list. 

Above  all,  the  British  Government  as  a  neutral  is 
on  record  as  declaring  that  no  belligerent  can  make 
cotton  absolute  contraband.  Such  action  was 
attempted  by  Russia  in  the  Russo-Japanese  War. 
Upon  instructions  from  Lord  Lansdowne,  the  British 
Ambassador  at  St.  Petersburg  protested  against  this 
procedure.  His  letter  to  the  Russian  Minister  of 
Foreign  Affairs,  resulting  in  forcing  Russia  to  take 
cotton  from  the  absolute  contraband  list,  read : 

"British  India  is  by  far  the  largest  exporter  of 
raw  cotton  into  Japan.  The  quantity  of  raw  cotton 
that  might  be  used  for  explosives  would  be  infinitesi- 
mal in  comparison  with  the  bulk  of  the  cotton  ex- 
ported from  India  to  Japan  for  peaceful  purposes, 
and  to  treat  harmless  cargoes  of  this  latter  descrip- 
tion as  unconditionally  contraband  would  be  to  sub- 
ject a  branch  of  innocent  commerce  to  a  most  unwar- 
rantable interference." 

If  cotton  was  to  be  banned  it  was  imperative  that 
some  other  way  be  found  of  dealing  with  this  com- 
modity, and  before  long  the  desired  opportunity 
arose.  On  February  4  the  German  Admiralty,  in 
retaliation  against  England's  alleged  violations  of 
the  Declaration  of  London  and  all  international  law 
in  general,  declared  the  waters  around  Great  Britain 
a  War  Zone  where  enemy  merchant  ships  would  be 
torpedoed  and  where  neutral  vessels  and  citizens 
would  not  be  safe.  The  War  Zone  Decree  was  to  be 
effective  from  February  18. 


150   EC0X0:\1IC  ASPECTS  OF  THE  WAR 

Retaliation  by  England  in  the  form  of  a  complete 
stoppage  of  our  exports  to  Germany  was  fore- 
shadowed in  a  cable  from  the  British  Government  to 
the  British  Embassy  in  Washington,  given  out  for 
publication  on  February  5,  the  day  after  the  War 
Zone  announcement.     The  cable  read  in  part : 

"The  apparent  intention,  however,  of  the  German 
Government  to  sink  merchant  ships  by  submarines, 
without  bringing  them  into  port  or  providing  ac- 
connnodation  for  their  crews,  and  regardless  of  loss 
of  civilian  lives,  and  the  attempt  to  effect  this  even 
against  a  hospital  ship,  has  raised  very  seriously  the 
question  whether  Great  Britain  should  adopt  in 
retaliation  more  stringent  measures  against  German 
trade. 

"It  is  recognized  that  when  any  such  decision  to 
this  effect  is  reached,  due  care  must  be  taken  not  to 
inflict  loss  upon  neutral  ships  which  have  sailed 
before  any  warning  has  been  given  or  the  decision 
announced." 

This  purpose  was  further  indicated  in  the  last 
paragraph  of  the  note  of  February  10,  addressed  by 
Sir  Edward  Grey  to  the  American  Ambassador  at 
London.*  On  the  following  day,  February  11, 
Premier  Asquith  in  the  House  of  Commons  made  a 
statement  thus  reported  in  American  press  de- 
spatches : 

Premier  Asquith,  in  an  announcement  made  to  the 
House   of   Commons   this   afternoon,   said   that   the 

*  The  paragraph  ends :  "It  is  impossible  for  one  belligerent 
to  depart  from  the  rules  and  precedents  and  for  the  other 
to  be  bound  by  them." 


STOPPING  COTTON  MOVEMENT      151 

British  Government  was  about  to  take  more  stringent 
measures  against  the  trade  of  Germany. 

Replying  to  a  question  put  by  Admiral  Lord 
Charles  Beresford  "whether  the  government  will  place 
all  food  and  raw  material  used  in  German  industries 
on  the  list  of  absolute  contraband,"'  the  Premier 
said: 

"The  government  is  considering  the  question  of 
taking  measures  against  German  trade  in  view  of  the 
violation  by  the  enemy  of  the  rules  of  war.  I  hope 
shortly  to  make  an  announcement  of  what  those 
measures  are  to  be." 

It  is  instructive  to  note  the  tentative  form  in  which 
the  blockade  proposal  still  remained.  To  Lord  Beres- 
ford's  question  whether  Great  Britain  would  place 
on  the  contraband  list  raw  materials  for  German 
industries,  the  Premier  would  only  state  that  the 
government  was  considering  what  measures  should 
be  taken.  The  measure  it  was  considering  could  as 
well  have  been  announced  in  parliament  on  February 
11  as  on  March  1,  when  the  blockade  was  finally 
proclaimed.  But  one  thing  had  to  be  assured:  that 
American  public  opinion,  which  in  October  had  re- 
volted against  the  interference  with  cotton,  would  not 
again  revolt.  The  intimation  of  Mr.  Asquith  on 
February  11,  cabled  to  this  country,  served  to  test 
whether  that  opinion  was  still  active. 

On  February  17  a  test  was  again  made.  De- 
spatches from  London  stated  that  a  proclamation 
was  momentarily  expected  declaring  "a  blockade  of 
the  German  coast,  or^  at  any  rate,  the  prohibition  of 
foodstuffs    destined   for   Germany."      England   still 


152   ECONOMIC  ASPECTS  OF  THE  WAR 

left  the  way  clear  for  a  strategic  retirement  should 
Washington  speak.     Washington  was  silent. 

The  preliminaries  having  been  completed,  on 
March  1  the  now  famous  March  11  Order  in  Council 
was  announced  by  Mr.  Asquith  in  parliament,  though 
it  was  not  formally  published  until  March  15.  The 
announcement  produced  the  desired  effect  on  insur- 
ance companies,  carriers  and  shippers.  The  Order 
in  Council  was  in  practical  operation  on  March  2. 
When  finally  promulgated  it  declared  subject  to  cap- 
ture all  movement  of  goods  to  or  from  Germany 
whether  direct  or  via  neutral  countries.  Such  an 
Order  could  have  but  one  meaning:  that  Great 
Britain  proposed  a  blockade. 

Steamers  at  once  refused  to  take  any  more  cotton 
or  other  shipments  of  German  destination  or  origin. 
Insurance  was  withdrawn  on  all  such  shipments,  no 
matter  over  what  route  they  moved.  A  large  volume 
of  cotton  had  been  contracted  for  German  delivery, 
but  had  not  yet  moved  from  this  country.  Its  owners 
faced  a  severe  situation. 

It  is  interesting  to  learn  how  for  one  month  this 
hardship  was  modified.  Ari  American  government 
official  called  to  ask  the  Washington  Ambassador  of 
Great  Britain  to  do  him  a  personal  favor.  America, 
he  said,  not  recognizing  the  Order  in  Council  or  the 
validity  of  the  British  blockade,  obviously  could  not 
officially  ask  for  a  modification  of  that  which  we  con- 
sidered non-existent.  It  is  a  palpable  absurdity  to 
modify  what  is  not.  However,  could  not  His 
Majesty's  Ambassador  as  a  personal  favor  consent 


STOPPING  COTTON  MOVEMENT      153 

to  some  measure  that  would  permit  the  cotton 
shippers,  who  before  March  1  had  sold  cotton  to 
Germany,  to  forward  their  cotton? 

The  British  Ambassador  yielded  and  wrote  a  tele- 
gram. It  was  sent  to  London,  resulting  in  the  fol- 
lowing special  cotton  dispensation  being  granted  by 
the  British  Embassy  in  Washington,  in  a  communi- 
cation issued  by  it  on  March  8 : 

"Many  inquiries  have  been  received  as  to  the  treat- 
ment to  be  accorded  to  cotton  shipped  to  Europe  in 
view  of  the  restrictive  measures  proposed  to  be  taken 
by  the  Allied  Governments. 

"As  already  announced,  there  is  no  question  of 
confiscating  cotton  cargoes  that  may  come  within 
the  scope  of  the  Order  in  Council  to  be  issued.  The 
following  arrangement  has  been  come  to  in  London 
as  to  cotton  consigned  to  neutral  ports  only. 

««One — All  cotton  for  which  contracts  of  sale  and 
freight  engagements  had  already  been  made  before 
March  2  to  be  allowed  free  (or  bought  at  contract 
price  if  stopped),  provided  ships  sail  not  later  than 
March  31. 

"Two — Similar  treatment  to  be  accorded  to  all 
cotton  insured  before  March  2,  provided  it  is  put  on 
board  not  later  than  March  16. 

"Three — All  shipments  of  cotton  claiming  above 
protection  to  be  declared  before  sailing,  and  docu- 
ments produced  to  and  certificates  obtained  from 
consular  officers  or  other  authority  fixed  by  (Allied) 
Governments.  Ships  or  cargoes  consigned  to  enemy 
ports  will  not  be  allowed  to  proceed." 

That  is,  cotton  contracted  for  Germany  before 
March  1  might  be  shipped  to  neutral  countries  up  to 


154  ECONOMIC  ASPECTS  OF  THE  WAR 

March  31,  though  not  to  Germany  direct.  The  modi- 
fication of  the  original  Order  was  a  shght  one;  it 
merely  prevented  that  Order  from  being  retro- 
active. Moreover,  the  provision  that  vessels  should 
be  allowed  to  proceed  or  he  bought  at  the  contract 
price  meant  that  England  reserved  the  right  to  stop 
and  requisition  cargoes  from  America  to  neutrals  in 
the  future. 

One  vessel  with  a  cargo  destined  for  Germany  was 
allowed  to  go  forw^ard  after  March  31.  The  condi- 
tions under  which  the  vessel  sailed  are  an  instance  of 
what  England  described  as  sympathetic  considera- 
tion of  the  cotton  interests.  Due  to  a  lateness  in 
arrival  of  the  S.  S.  Kina  at  her  berth  in  Savannah, 
it  became  impossible  to  load  her  before  the  end  of 
March.  Permission  for  time  extension  on  this  one 
ship  was  sought  by  the  State  Department  from  His 
Majesty's  Government.  His  Majesty's  Government, 
through  the  medium  of  the  American  Ambassador  at 
London,  accorded  this  favor  to  the  State  Depart- 
ment in  a  cable  from  Mr.  Page,  dated  March  29, 
1915.  It  was  firm,  as  well  as  kind,  and  read  as 
follows : 

"I  am  informed  by  the  Foreign  Office  on  the  24th 
that  the  S.  S.  Keit  (Kina),  in  view  of  the  special 
circumstances  of  the  case,  will  be  permitted  to  go 
forward  on  her  prearranged  trip  from  Savannah  to 
Rotterdam,  Goteborg,  and  Copenhagen,  provided, 
however,  that  her  cargo  of  cotton  is  covered,  with  the 
exception  of  the  date  of  sailing,  by  the  terms  of  the 
agreement  recently  concluded  concerning  such  ship- 
ments,   and    further   provided    that    there    shall   be 


STOPPING  COTTON  MOVEMENT      155 

allowed  no  undue  delay  to  occur  in  reloading  this 
steamer  on  arrival  at  Savannah  and  in  the  departure 
of  the  steamer  from  Savannah. 

^'Sir  Edward  Grey  most  earnestly  requests  that  it 
be  distinctly  understood  that  this  indulgence  must 
not  be  u^ed  as  a  precedent  for  further  exceptions 
from  the  provisions  of  the  agreement  above  referred 

tor 

The  request  was  distinctly  understood,  and  no  fur- 
ther indulgence  was  asked.  The  British  allowed  the 
Kina"  to  go  forward.  They  did  not  allow  her  to  reach 
her  destination.  She  was  stopped  and  thrown  into  Qa 
British  prize  court. 

Indeed,  it  became  evident  not  only  that  His 
Majesty's  Government,  as  announced  in  the  Order 
of  March  11,  would  allow  no  cargoes  to  go  directly 
to  German  ports,  but  also  that  even  the  German 
cotton  for  which  indirect  shipment  was  nominally 
permitted  was  by  no  means  to  be  allowed  to  reach 
its  destination.  To  be  sure  there  was  nothing  in 
international  law  or  the  English  law  to  justify 
the  stoppage  of  these  neutral  cargoes — they  were 
mainly  cargoes  consigned  to  forwarders  in  neutral 
countries.  Yet  the  contingency  was  met  by  the 
British  diplomats.  On  March  31,  as  we  have  seen, 
during  trial  of  the  Wilhelmina  case,  the  British 
crown  lawyers,  to  the  astonishment  of  this  country, 
produced  a  new  Order  in  Council  empowering  His 
Majesty's  Government  to  requisition  the  cargo  of 
any  neutral  vessel  in  a  British  port. 

The  rest  was  easy.  Since  a  British  cruiser  could 
bring   into    a   British   port    any    neutral   merchant 


156   ECONOMIC  ASPECTS  OF  THE  WAR 

vessel  on  the  lilgli  seas,  this  Order  meant  that  no 
vessel  carrying  goods  to  neutral  European  countries, 
whether  cotton  or  anything  else,  was  exempt  from 
the  unloading  and  impressment  of  its  cargo  by 
England.  In  order  to  make  sure  that  no  cotton 
would  reach  Germany  many  cargoes  destined  for 
[  neutral  consumption  were  bought  by  England.  For 
cargoes  thus  unlawfully  seized  the  compensation 
promised  by  His  Majesty's  Government  was  by  no 
means  sufficient.  The  interference  with  established 
trade,  the  breaking  up  of  commercial  relationships, 
were  matters  of  more  serious  import  than  the  values 
of  the  shipments  directly  involved.  If  you  in  Scan- 
dinavia buy  a  cargo  of  cotton  and  never  receive  it, 
I  may  be  relieved  by  Great  Britain  from  loss  on  this 
particular  shipment.  But  I  get  no  more  orders  from 
you.  You  will  not  order  what  cannot  be  delivered. 
One  of  the  country's  large  cotton  exporters  wrote  on 
May  17 : 

"The  exporter  of  cotton  today  can  sell  at  a  good 
price  cotton  to  Sweden,  Norway,  Holland  and 
Switzerland  for  immediate  delivery  or  for  next  fall's 
shipment,  but  he  is  prevented  from  so  doing  by  the 
fact  that  under  the  British  Orders  in  Council  every 
bale  is  subject  to  detention  and  seizure  though 
shipped  in  neutral,  even  American  ships.  It  is  obvi- 
ous that  the  spinner  in  Sweden  or  the  dealer  in  Nor- 
way cannot  afford  to  buy  and  pay  cash  for  cotton 
when  the  chances  are  that  there  will  be  delivered  to 
him  not  the  cotton  itself,  but  a  claim  against  some 
government  for  detention  and  seizure  of  his  goods." 


STOPPING  COTTON  MOVEMENT      157 

It  is,  of  course,  far  from  a  handicap  to  the  British 
manufacturer  of  cotton  goods,  when  competitor's  in 
Scandinavia  find  their  supplies  of  raw  cotton  scarce 
and  high  in  price.  The  British  market  is  kept 
flooded  with  diversions  of  neutral-bound  cargoes. 
On  August  5,  1915,  despatches  from  Washington 
quoted  the  Department  of  Commerce  as  stating  that 
British  exports  of  cotton  goods  and  cotton  yarns  to 
Scandinavia  and  Holland  in  the  first  six  months  of 
1915  showed  a  great  increase  over  1914.  At  the 
same  time  that  our  exporters  are  hindered  in  their 
exports  to  European  neutrals,  British  raw  cotton 
dealers  expand  their  re-exportation  of  cotton  im- 
ported from  us.  In  June,  1915,  Holland  and  Sweden 
each  took  from  England  five  times  as  much*  raw 
cotton  as  in  June,  1914. 

In  March  and  April,  26  cargoes  of  cotton  destined 
for  neutral  European  ports  were  held  up  in  England. 
The  "unofficial"  Foreign  Trade  Advisers  of  the  State 
Department  were  conferring  with  the  British  Em- 
bassy in  Washington  in  an  attempt  to  get  these  ship- 
ments released  or  paid  for.  On  May  20  the  pressure 
was  so  great  that  the  British  Foreign  Office  included 
a  reference  to  cotton  in  the  press  statement  which  it 
gave  out,  primarily  regarding  the  detained  meat 
cargoes.*  It  was  stated  that  the  cotton  would  be 
purchased  in  accordance  with  the  "agreement" 
reached  with  American  cotton  interests  regarding 
cotton  shipped  in  March.  It  was  averred  that  this 
arrangement  was  highly  satisfactory  to  the  cotton 

*  The  statement  is  abstracted  in  Chapter  VI. 


158   ECONOMIC  ASPECTS  OF  THE  WAR 

interests  and  that  "His  Majesty's  Government  were 
given  to  understand  that  the  provisions  of  the 
arrangement  were  acceptable  to  the  United  States 
Government." 

The  cotton  interests  had  no  means  of  bringing  to 
Britain  knowledge  of  how  little  satisfactory  to  them 
was  an  arrangement  which  limited  to  one  month  the 
continuance  of  their  trade  with  neutral  countries  and 
Germany.  Our  government,  to  indicate  that  Eng- 
land was  under  a  misapprehension  in  supposing  that 
it  approved  of  any  arrangement  supporting  the 
Order  in  Council,  ordered  its  Foreign  Trade  Advisers 
to  withdraw  from  conferences  with  the  British  Em- 
bassy until  England  clearly  understood  the  matter. 
Three  days  later  the  British  Ambassador  issued  an 
official  statement  saying  that  the  unofficial  arrange- 
ments in  question  of  course  did  not  in  any  way  involve 
a  departure  by  either  government  from  its  expressed 
views  regarding  the  blockade. 

Not  until  June  had  Britain  begun  making  pay- 
ments on  the  cotton.  On  July  19  Sir  Robert  Cecil 
announced  in  parliament  that  $3,500,000  had  been 
paid  on  the  seized  cargoes,  which  by  this  time  were 
sixty  in  number. 

The  procedure  through  which  our  shippers  had  to 
go,  in  order  to  get  any  return  for  their  detained 
shipments,  was  one  of  unexampled  complexity.  When 
the  ship  sailed  from  this  country  duplicate  copies  of 
papers,  such  as  shipping  documents  and  contracts, 
were  to  be  given  to  British  consular  officials  in  our 
ports.     The  papers  were  forwarded  to  London  and 


STOPPING  COTTON  MOVEMENT      159 

arrived  in  England  at  about  the  same  time  as  the 
cargo  which  was  detained  for  examination.  The 
papers  were  referred  to  the  British  Admiralty,  thence 
to  the  Foreign  Office  and  finally  to  the  Board  of 
Trade.  The  Board  of  Trade  took  two  weeks  to 
examine  the  contracts.  The  papers  were  then  sent 
to  the  Admiralty  and  by  it  to  the  Foreign  Office, 
which  had  to  deal  with  the  shipper. 

In  the  meantime  six  weeks  were  consumed.  The 
shipper  felt  by  this  time  that  he  ought  to  have  his 
cargo  freed  or  paid  for.  The  "arrangement"  by 
wliich  the  Admiralty  detained  cargoes  provided  that 
they  should  be  purchased  "at  contract  price"  or 
released.  If  the  shipments  were  contracted  for  when 
they  left  this  country,  the  price  appeared  in  the  con- 
tract. If  they  were  sent  to  a  broker — for  example, 
in  Gothenburg — to  be  sold,  the  fair  price  was  obvi- 
ously the  market  price  at  Gothenburg  on  the  date 
when  the  cotton  would  have  arrived,  had  it  not  been 
detained  by  England.  But  when  the  American  owner 
attempted  to  get  payment  on  either  of  these  bases, 
the  British  Foreign  Office  was  willing  to  do  no  more 
than  make  a  payment  "on  account"  (maximum  ten 
cents  per  pound),  insisting  that  the  eventual  price 
should  be  arbitrated. 

On  July  20  the  Board  of  Trade  announced  a  rul- 
ing that  detained  cotton  cargoes  whose  ownership 
had  passed  to  Germans  would  be  confiscated  without 
payment. 

One  of  the  most  novel  forms  of  "pressure"  which 
Great   Britain   has    exercised   has   been   applied   to 


160  ECONOMIC  ASPECTS  OF  THE  WAR 

cotton  dealers  in  this  country.  Many  of  the  most 
prominent  are  associate  members  of  the  Liverpool 
Cotton  Exchange.  The  Liverpool  Exchange  has 
sent  these  American  dealers,  to  be  signed,  an  agree- 
ment not  to  deal  directly  or  indirectly  with  enemies 
of  His  Britannic  Majesty.  Those  who  so  sign  will 
have  their  names  posted  in  the  Liverpool  Exchange 
and  receive  preference  by  the  Liverpool  members. 
By  implication,  those  who  do  not  sign  will  be  black- 
listed by  those  who  handle  the  great  cotton  trade  of 
England.* 

These  then  were  the  measures  which  England  took 
to  stop  the  movement  of  American  cotton  to  Ger- 
many. The  "blockade"  made  contraband  of  every- 
thing. In  the  spring  of  1915  this  was  explained  by 
His  Majesty's  Attorney  General  to  a  group  of  Brit- 
ish scientists,  who,  better  versed  in  natural  science 
than  international  law,  followed  the  lead  of  Sir 
William  Ramsay  and,  even  after  March  1,  demanded 
that  cotton  should  be  made  contraband.  The  Attor- 
ney General  explained  that  the  blockade  prevented 
everything  from  going  to  Germany  by  sea  and  hence 
it  would  be  superfluous  to  name  cotton  as  an  especial 
object  of  embargo.  The  Order  in  Council,  he  said, 
was  very  effective  in  preventing  cotton  from  reach- 
ing England's  enemies.  Moreover,  he  continued,  to 
declare  cotton  contraband  would  be  to  set  a  prece- 
dent which  might  return  to  plague  Great  Britain  in 
the  future. 

*  For  the  text  of  the  agreement,  see  Appendix,  p.  322, 


STOPPING  COTTON  MOVEMENT      161 

The  effectiveness  of  the  British  poHcy  in  prevent- 
ing the  Germans  from  buying  and  getting  our  cotton 
is  measured  by  the  fall  in  cotton  prices  in  the  Ameri- 
can market. 

We  have  seen  that  the  cotton  market  reached  its 
high  level  at  the  end  of  April.  Though  shipments 
toward  Germany  had  been  cut  off  on  March  31,  the 
effect  of  the  great  British  and  German  imports 
carried  through.  But  early  in  May  the  trend  of 
prices  began  to  reflect  the  apprehension  of  the  mar- 
ket as  to  the  future,  an  apprehension  that  was  justi- 
fied as  the  months  went  by. 

The  German  takings  were  over.  What  might  have 
been  exported  to  that  country  lay  a  dead  weight  on 
the  market.  Spot  cotton  in  New  York,  which  was 
10.60  cents  per  pound  on  April  24,  dropped  to  10.05 
cents  on  May  6.  Through  May  and  June  it  aver- 
aged 9.50  to  9.75  cents.  By  the  middle  of  July  the 
July  option  had  sunk  to  8.25  cents.  The  prospects 
for  a  successful  marketing  of  the  1915  crop  had 
indeed  become  bad. 

What  is  the  military  value  to  England  of  all  this 
economic  pressure  that  she  is  exercising  in  the  South.? 
Will  the  German  ammunition  makers  in  the  fall  of 
1915  be  embarrassed  for  cotton?  It  is  used  mainly 
in  the  form  of  gun  cotton  to  make  charges  for  the 
artillery  and  torpedoes.  Certainly  no  reports  from 
the  front  indicate  that  the  German  heavy  artillery  is 
sinking  into  a  state  of  inactivity  and  there  seems  to 
be  no  excessive  economy  of  torpedoes.  That  any 
such  result  will  occur  can  be  asserted  or  expected  only 


162   ECONOMIC  ASPECTS  OF  THE  WAR 

by  those  who  shut  their  eyes  to  the  plain  facts  of  the 
case. 

At  the  opening  of  the  cotton  shipping  season, 
August  1,  1914,  the  stock  of  cotton  in  Bremen  (to 
say  nothing  of  the  stock  in  German  spinners'  hands) 
was  309,000  bales,  a  quantity  in  excess  of  other 
recent  years.  The  direct  imports  of  American  cotton 
into  Germany  from  August  1,  1914,  to  April  1,  1915, 
were  242,661  bales.  Adjacent  neutral  countries  in 
the  same  period  imported  1,668,846  bales  more  than 
in  the  same  months  last  year.  Assuming  that  all 
these  excess  imports  of  adjacent  neutrals  were 
destined  for  Germany,  the  total  stock  which  that 
country  had  up  to  April  1,  1915,  amounted  to 
2,220,507  bales. 

It  is  likely  that  part  of  the  excess  exports  to  adja- 
cent neutrals  were  for  the  consumption  of  these 
countries  themselves.  In  particular,  it  is  possible 
that  Italy  needed  considerably  more  cotton  than  last 
year  to  supply  her  own  textile  mills,  which  appro- 
priated some  of  the  foreign  trade  in  cotton  goods 
with  countries  that  Germany  had  difficulty  in  reach- 
ing, such  as  Mediterranean  lands  and  South  America. 
Assume,  therefore,  that  Germany  to  April  1  had 
2,000,000  bales  of  American  cotton  to  meet  her  re- 
quirements. This  is  only  800,000  bales  short  of 
our  exports  to  both  Austria  and  Germany  in  the  year 
ending  August  1,  1914.  Moreover,  what  of  the 
150,000  bales  annually  raised  in  Turkey?  What  of 
the  100,000  bales  of  Persia;  and  the  1,000,000  of 
Russian  Turkestan?     Is  there  any  doubt  that  the 


STOPPING  COTTON  MOVEMENT      163 

Jewish  dealers  who  handle  this  Russian  trade  smug- 
gled a  part  of  it  into  Germany,  to  get  the  high  prices 
which  Germany,  alone  of  all  buyers,  was  offering 
during  the  winter?  Why  in  May  did  England  forbid 
the  export  of  Egyptian  cotton  to  Italy,  if  it  was 
not  moving  through  to  Germany?* 

No  one  can  imagine  that  the  military  will  not  be 
able  to  meet  its  needs  from  the  vast  store  at  hand, 
not  only  its  needs  for  this  year  but  also  for  a  long 
time  to  come.  Besides,  so  Hudson  Maxim  says, 
there  are  substitutes  for  raw  cotton  in  making  the 
explosive  gun  cotton.    One,  he  informs  us,  is  cellulose. 

Great  Britain  is  aware  of  all  this.  She  knows  that 
in  the  case  of  cotton,  as  in  the  case  of  grain,  the  mili- 
tary is  fully  supplied.  The  pressure  will  fall  upon 
the  civil  users  of  these  products,  if  it  falls  at  all. 
The  hope  is  that  the  pressure  on  these  civil  users  will 
become  unbearable  and  that  they  will  force  the  mili- 
tary to  sue  for  peace. 

What  is  the  prospect  of  a  cotton  famine  in  the 
German  textile  industries?  For  certain  reasons, 
Germany  needs  less  cotton  than  formerly.  She  has 
a  large  export  trade  in  cotton  goods.  In  1912  this 
trade  amounted  to  $31,055,000.     Since  the  Orders 

*  In  a  letter  written  to  the  London  Times  in  April,  James 
G.  Peel  of  Manchester,  a  large  cotton  dealer,  shows  that  the 
exports  of  Egyptian  cotton  to  Germany  and  Austria  dropped 
from  99,000  bales  in  the  months  October-March  of  1913-1914, 
to  nothing  in  those  months  of  1914-1915.  But  the  exports  of 
Egyptian  cotton  to  Italy  and  Switzerland,  neighbors  of  Austria 
and  Germany,  increased  exactly  99,000  bales  to  the  period 
under  question. 


164  ECONOMIC  ASPECTS  OF  THE  WAR 

in  Council  of  March  11  placed  a  ban  on  all  German 
exports,  even  if  shipped  from  neutral  ports,  the  only 
countries  Germany  can  reach  are  those  accessible  by 
land  or  via  the  Baltic,  which  England  does  not  con- 
trol. Other  oversea  shipments  have  ceased.  The 
only  foreign  markets  still  available  are  Turkey,  Rou- 
mania,  Bulgaria,  Austro-Hungary,  Switzerland, 
Holland  and  Scandinavia.  In  1913  the  shipments 
to  these  countries  from  Germany  were  about  $4,000,- 
000,*  or  only  13  per  cent  of  her  exports  of  cottons. 
Therefore  less  raw  material  than  normal  is  needed 
to  work  up  for  the  export  trade. 

Yet  there  is  reason  to  believe  that  more  cotton 
could  have  been  used  by  German  textile  industries 
than  was  sent  them  from  the  1914  crop.  It  is  re- 
called that  up  to  April  1  we  sent  to  Germany  about 
250,000  bales;  and  to  adjacent  neutrals  1,650,000 
bales  more  than  last  year.  Assuming  that  250,000 
bales  of  our  excess  exports  to  adjacent  neutrals  were 
actually  destined  for  these  neutrals,  it  appears  that 
up  to  April  1  we  sent  Germany,  directly  and  in- 
directly, about  1,650,000  bales.  With  regard  to 
German  consumption,  other  estimates  agree  pretty 
nearly  with  those  of  Ambassador  Gerard,  who  in 
December  wired  the  State  Department  that  in  the 
year  1914-1915  Germany  could  take  about  2,000,000 
bales,  Austria  about  800,000,  together  2,800,000. 
If  that  is  the  case,  1,150,000  bales  more  of  the  1914 
crop  could  have  been  sold  to  the  Teutonic  Allies. 

*  This  does  not  include  exports  to  Bulgaria,  Austro-Hungary 
and  Denmark,  for  which  figures  were  not  available. 


STOPPING  COTTON  MOVEMENT      165 

If  this  cotton  had  been  allowed  to  move,  it  would 
have  probably  kept  the  price  since  May  1  at  or 
near  11  cents.  At  11  cents  per  pound,  1,150,000 
bales  would  have  meant  sales  of  $63,000,000  of  cotton 
to  Germany,  to  say  nothing  of  the  better  prices  that 
holders  of  cotton  would  have  received  for  sales  to 
American  mills.  Above  all,  the  large  quantity  of  the 
1914  output  which  we  are  carrying  into  the  1915 
crop  year  (beginning  August  1)  would  have  been 
considerably  reduced.  All  this  indicates  the  sacrifice 
which  the  South  is  demanded  to  make  to  a  blockade 
which,  the  American  Government  says,  England  does 
not  lawfully  maintain. 

With  the  great  German- Austrian  market  closed  by 
a  blockade,  the  prospects  for  this  1915  season  are  not 
bright.  The  yield  will  be  a  good  one.  Early  reports 
of  a  larger  acreage  reduction  have  not  proved  true. 
There  has  been  some  reduction  in  the  use  of  fertilizer, 
especially  of  the  potash  elements,  but  this  reduction 
will  not  greatly  affect  the  crop,  the  first  year  it 
occurs. 

It  is  simple  to  illustrate  why  no  large  acreage  re- 
duction is  not  made.  As  a  southern  planter  I  may 
know  it  to  be  in  the  general  interests  of  the  South, 
and  of  high  prices  in  general,  that  the  cotton  acreage 
should  be  reduced.  But  I  want  the  higher  prices  to 
apply  to  as  much  cotton  as  I  can  raise.  Therefore  I 
will  let  the  other  fellow  carry  out  the  reduction  in 
acreage.  No  considerable  voluntary  curtailment  of 
independent  agricultural  producers  has  ever  yet  come 


166   ECONOMIC  ASPECTS  OF  THE  WAR 

to  pass.  We  look  for  a  good  crop ;  namely,  at  least 
12,000,000  bales. 

Much  of  the  1914  crop  will  be  carried  over.  In 
April  Mr.  Harding,  a  member  of  the  Federal  Reserve 
Board,  speaking  before  the  Baltimore  Chapter  of  the 
American  Institute  of  Banking,  estimated  this  carry- 
over at  5,000,000  bales,  due  to  the  fact  that  by 
April  foreign  and  domestic  spinners  had  already  laid 
in  supplies  with  an  eye  to  the  future,  in  excess  of 
their  current  requirements.  More  recent  estimates 
place  the  surplus  at  4,000,000  bales.  In  any  case  it 
wiU  be  very  large.  The  visible  supply  of  cotton  in 
the  world  at  the  end  of  July,  1915,  was  2,500,000 
bales  higher  than  last  year.  The  quantity  of  the 
1914  American  crop  still  in  the  hands  of  producers 
was  1,000,000  bales  more  than  usual. 

There  is  a  simple  solution  to  the  crisis  that  con- 
fronts the  South.  Another  autumn  like  the  last  will 
ruin  it.  The  present  and  prospective  elimination  of 
the  German- Austrian  market  through  an  unlawful 
blockade  is  the  largest  single  element  depressing 
prices  and  threatening  the  future.  Nothing  would 
clear  the  situation  like  the  lifting  of  that  blockade. 
If  it  is  not  lifted,  and  if  cotton  prices  are  not  to  sink 
to  low  levels,  either  the  cotton  raisers  must  have 
advanced  to  them  money  with  which  to  hold  millions 
of  bales  of  cotton  until  something  happens — perhaps 
peace — to  restore  the  normal  purchasing  power  of 
the  world,  or  someone  else  will  have  to  carry  enough 
cotton  to  relieve  the  weight  on  the  market. 

The  problems  here  involved  go  far  beyond  the 


STOPPING  COTTON  MOVEMENT      167 

limits  of  this  book.  The  financial  aid  necessary  will 
be  in  the  nature  of  a  valorization  of  the  cotton  crop. 
Banks  which  are  asked  to  participate  in  the  proceed- 
ing point  out  that  the  South  is  not  built  to  hold  the 
export  cotton  crop.  It  has  not  the  warehouses.  The 
export  quota  moves  abroad  and  is  held  there.  Be- 
sides this  physical  difficulty,  the  financial  risk  of 
carrying  cotton  for  the  indefinite  period  that  this 
war  may  last  is  very  great. 

In  the  middle  of  July,  1915,  a  renewed  agitation 
arose  in  England  for  making  cotton  contraband. 
The  British  Government  announced  its  definite  inten- 
tion of  confining  European  neutrals  to  the  quotas  of 
cotton  which  they  had  imported  in  normal  years.  The 
London  Times  suggested  that  Britain  spend  $175,- 
000,000  to  buy  up  the  amount  of  American  cotton 
usually  sold  to  the  Central  Empires  and  European 
neutrals  and  then  declare  it  contraband.  The  cotton 
so  bought  was  to  be  held  off  the  market  until  the 
close  of  the  war.  It  was  the  most  magnificent  bribe 
ever  proposed.  His  Majesty's  Government  has  not 
adopted  the  suggestion. 

From  the  British  Embassy  at  Washington,  near 
the  end  of  July,  seemed  to  emanate  a  suggestion  that 
a  cotton  pool  be  formed,  under  the  auspices  of  Eng- 
land and  America,  to  distribute  among  the  cotton 
interests  such  shipments  as  England  would  allow  to 
go  forward  to  neutral  countries.  It  was  said  that 
England  would  abolish  her  policy  of  detaining  cotton 
moving  to  neutrals  if  America  would  agree  to  ship 
neutrals  no  more  than  their  normal  takings. 


168   ECONOMIC  ASPECTS  OF  THE  WAR 

All  these  false  remedies  for  the  disease  remind  us 
of  those  proposed  in  the  fall  of  1914.  Now,  as  then, 
the  true  remedy  is  the  recovery  of  the  closed  German- 
Austrian  market.  Now,  as  then,  we  need  to  think 
straight,  to  ask  with  the  power  at  our  command  and 
to  break  a  blockade  which  we  declare  is  illegal  and 
which  threatens  with  ruin  an  entire  section  of  the 
country. 


CHAPTER  IX 
CoppEE  AS  Lawful  Commerce 

Cotton,  as  has  been  seen,  is  our  most  Important 
article  of  export.  It  is  also  the  one  which  has  suf- 
fered chiefly  through  belligerent  activities  on  the 
sea.  By  a  coincidence  our  second  largest  item  of  ex- 
port, copper,  is  the  one  to  which  the  second  largest 
measure  of  interference  was  allotted. 

While  the  actual  monetary  loss  which  befell  copper 
interests  (and  they  suffered  heavy  losses  in  the  first 
six  months  of  the  war)  was  not  so  great  as  in  the 
case  of  cotton,  such  losses  as  did  occur  were  traceable 
to  violations  of  international  law  and  the  rights  of 
neutral  trade,  of  a  character  especially  flagrant. 

Copper,  like  cotton  and  petroleum,  is  a  resource 
conferred  upon  this  country  more  richly  than  on  any 
other.  In  its  raw  state  it  is  found  principally  in 
Michigan,  Montana,  Arizona  and  Utah.  Of  the 
normal  production  of  140,000,000  pounds  per  month 
at  the  refineries,  mainly  at  the  Atlantic  seaboard, 
about  110,000,000  pounds  come  from  domestic  and 
30,000,000  pounds  from  Imported  ores. 

America  turns  out  over  half  of  all  the  copper  pro- 
duced In  the  world  but  consumes  only  a  third  of  the 
world's  output.  Over  half  our  product  has  been  ex- 
ported in  recent  years.    This  means  that  of  the  grow- 


170  ECONOMIC  ASPECTS  OF  THE  WAR 

ing  number  of  our  citizens  employed  in  copper  mining 
and  smelting,  about  70,000  in  all,  over  half  are  nor- 
mally working  to  supply  foreign  markets. 

The  principal  foreign  taker  of  our  copper  is 
Germany.  This  is  due  to  the  development  of  the 
German  industry  in  manufactured  copper,  ranking 
second  only  to  our  own.  Normally,  exports  to  Ger- 
many move  both  directly  and  via  Rotterdam. 
The  copper  consumption  of  the  Netherlands  itself  is 
not  large.  Practically  all  of  the  heavy  Dutch  tak- 
ings, usually  nearly  equal  to  the  direct  shipments  to 
Germany,  may  be  considered  as  destined  for  Ger- 
many. 

Our  shipments  to  Germany  and  Holland — that  is, 
our  exports  to  Germany — ^have  amounted  in  recent 
years  to  one-half  our  entire  exports  of  copper,  or 
one-quarter  of  our  entire  production.  There  were 
indeed  great  interests  affected  by  the  British  meas- 
ures which  for  three  months  hindered  the  movement 
of  copper  to  Germany  while  it  was  a  free  good  of 
commerce  or  as  conditional  contraband,  and  eventu- 
ally made  it  absolute  contraband,  subject  to  the  same 
summary  treatment  as  guns  or  shrapnel. 

Immediately  after  the  outbreak  of  war  the  copper 
producers,  excepting  in  the  Lake  Superior  region, 
reduced  their  output  to  50  per  cent  of  normal.  No 
one  knew  what  was  to  be  the  effect  of  the  war  upon 
our  exports.  Of  the  current  output,  just  before  the 
war  began,  two-thirds  had  been  going  abroad  and 
only  one-third  absorbed  by  the  slack  home  con- 
sumption. 


COPPER  AS  LAWFUL  COMMERCE     171 

On  August  1,  1914,  the  refineries  had  on  hand  a 
stock  of  100,000,000  pounds.  Copper  before  the  out- 
break of  the  war  was*  selling  for  thirteen  cents  per 
pound,  which  for  the  majority  of  mines  allows  a  very 
small  margin  of  profit.  The  price  started  to  decline 
immediately,  in  August.  With  copper  below  thirteen 
cents,  the  cheapest  place  to  store  what  cannot  be 
sold  is  in  the  ground. 

The  reduction  to  50  per  cent  of  normal  output, 
designed  as  an  emergency  measure,  was  destined, 
through  the  force  of  events,  to  carry  beyond  the  New 
Year. 

Copper  exports  to  Germany  being  so  important 
to  the  copper  industries,  we  had  from  the  beginning 
a  vital  interest  in  the  manner  in  which  copper  ship- 
ments were  treated  by  England,  the  belHgerent 
power  wliich  controlled  the  seas.  Upon  that  treat- 
ment depended  the  possibility  of  continuing  the 
German  trade.  As  in  the  case  of  cotton,  copper 
during  the  first  week  of  August  could  be  shipped 
nowhere,  for  financial  reasons  and  lack  of  marine 
tonnage.  Because  of  the  unsettlement  of  the  foreign 
exchanges  as  a  means  of  making  international  pay- 
ments, shippers  would  export  their  copper  only  on 
the  terms  of  "cash  against  shipper's  documents  in 
New  York."  This  method  of  payment  was  such  an 
innovation  that  it  was  some  time  before  foreign 
buyers  could  make  the  necessary  arrangements  with 
the  New  York  banks. 

With  this  difficulty  overcome,  as  it  was  in  a  short 
time,  shipments  of  copper  should  have  gone  forward 


172  ECONOMIC  ASPECTS  OF  THE  WAR 

to  all  nations  of  Europe  with  the  same  freedom  as  to 
England.  Nothing  in  the  international  law  code  by 
which  England  was  acting,  namely,  her  modified 
Declaration  of  London,  permitted  the  preventing  of 
copper  shipments  to  Germany. 

In  August,  1914,  England  took  twice  as  much  of 
copper  as  in  August  of  the  previous  year — 24,600,- 
000  pounds,  against  12,100,000  pounds.  In  August, 
1913,  the  shipments  to  Austria,  Germany  and 
Holland — the  total  German  takings — were  44,300,- 
000  pounds.  In  August,  1914,  not  a  pound  of 
copper  moved  to  Germany  or  Austria ;  and  only 
5,350,000  pounds  to  Holland,  compared  with  14,- 
200,000  pounds  in  August  of  the  year  before. 

To  appreciate  the  situation  fully,  it  is  necessary 
to  consider  the  status  of  copper  as  defined  by  the 
Declaration  of  London.  We  recall  that  in  an  Order 
in  Council  of  August  20,  England  announced  the 
Declaration  of  London  as  her  code  of  naval  warfare, 
making  certain  important  modifications.  Therefore, 
it  is  to  this  Declaration  that  we  must  look  to  find 
the  treatment  that  copper  might  reasonably  have 
expected  from  the  British  authorities.  Since  copper 
was  not  named  as  either  contraband  or  conditional 
contraband  in  the  British  contraband  list  of  August 
4,  accompanying  the  August  20  Order,  it  technically 
remained  a  free  article  of  commerce,  transportable 
direct  to  Germany  undisturbed,  in  all  but  German 
ships.  Still  less  could  there  be  interference  with 
shipments  to  Germany  via  adjacent  neutrals. 

At  the  outbreak  of  war  direct  shipments  of  copper 


COPPER  AS  LAWFUL  COMMERCE    173 

to  Germany  were  impossible,  since,  as  is  recalled  from 
Chapter  VII,  no  vessels  reached  Germany  from  the 
United  States  until  1915.  However,  copper  should 
have  moved  to  Germany  indirectly  through  Italy, 
Holland  and  Scandinavia. 

In  August  the  British  agents  in  this  country 
could  report  that  no  copper  was  going  to  Germany 
directly  and  apparently  none  by  the  indirect  route. 
There  were  no  exports  declared  for  Germany,  while 
the  copper  shipped  to  the  adjacent  neutrals  was  only 
7,200,000  pounds  compared  with  29,200,000  pounds 
in  August,  1913.  The  neutrals  were  getting  only 
one-quarter  of  their  normal  takings;  they  were 
obviously  not  receiving  a  surplus  which  could  be  sent 
forward  into  Germany. 

In  September,  however,  the  situation  changed. 
Our  copper  exports  to  Holland  and  Italy  reached 
normal,  while  those  to  Scandinavia  jumped  to  six 
times  their  volume  in  September,  1913.*     That  the 

*CoppER  Exports  to  European  Countries  Adjacent  to  Germany 
Comparison  of  September  1913  and  1914 

Sept.  1913  Sept.  1914  Increase,  1914 

Country                         Lbs.  Lbs.                   Lbs. 

HoUand 12,175,048  12,211,509                36,461 

Italy 3,127,053  3,352,606               225,553 

* 'Other  Europe" 1,209,132  7,443,688           6,234,556 


16,511,233         23,007,803  6,496,570 

It  is  fair  to  assume  that  the  increase  of  shipments  to  "Other 
Europe"  was  for  the  Scandinavian  countries.  "Other  Europe" 
means  Europe  exclusive  of  England,  France,  Germany,  Austria, 
Belgium,  Holland,  Italy  and  Russia. 


174   ECONOMIC  ASPECTS  OF  THE  WAR 

excess  was  all  destined  for  Germany  was  by  no  means 
a  necessary  inference,  as  will  be  shown.  But  Ger- 
man destination  was  a  possible  construction  to  be 
put  upon  those  excess  shipments. 

American  copper  interests  regarded  this  develop- 
ment with  satisfaction.  They  seemed  likely  to  regain 
their  market  on  the  Continent,  just  as  they  had 
already  more  than  regained  the  English  market, 
closed  in  the  first  few  days  of  the  war. 

But  the  British  Government  looked  at  the  situa- 
tion with  anything  but  pleasure.  England,  of 
course,  did  not  wait  until  the  tardy  American  gov- 
ernment statistics  were  published,  to  get  news  of  the 
destination  of  our  copper  exports.  These  facts  were 
ascertained  by  British  agents  from  the  ships'  mani- 
fests, filed  at  the  American  Custom  House,  and  were 
promptly  cabled  home. 

Though  in  the  September  statistics  given,  the 
increase  in  copper  exports  was  greatest  in  the  case 
of  "Other  Europe"  (Scandinavia),  yet  the  largest 
amount  actually  moving  into  Germany  was  prob- 
ably via  Holland.  Therefore  the  British  Government 
set  out  to  make  Holland  an  example  which  should  be 
heeded  by  other  adjacent  neutrals. 

The  September  measures  of  England  were  con- 
fined to  Holland  alone.  These  measures  were  four  in 
number. 

(1)  Dutch  dealers  were  induced  to  sell  to  the 
British  Government  the  stocks  of  copper  in  Dutch 
warehouses,  about  2,400  tons. 

(2)  Holland  was  induced  to  enact  an  embargo 


COPPER  AS  LAWFUL  COMMERCE     175 

forbidding  the  re-exportation  of  copper  that  entered 
her  borders. 

(3)  The  Holland- American  Line,  which  has  the 
only  important  regular  line  steamers  that  operate 
between  America  and  Holland,  was  induced  to  refuse 
copper  shipments  consigned  to  individuals  in  Hol- 
land. It  was  required  that  such  shipments  be  con- 
signed to  the  Dutch  Government. 

(4)  As  an  extra  precaution,  England  made  sure 
that  the  Holland-American  Line  knew  what  was 
meant. 

On  September  21,  while  1,500  tons  of  copper  were 
afloat  for  Holland  on  the  steamship  Rotterdam  and 
389  tons  on  the  steamship  Sloterdyk,  the  British 
Government  made  copper  conditional  contraband. 
At  the  time,  this  looked  like  a  comparatively  harm- 
less proceeding.  Neutrals  had  not  yet  learned  what 
it  meant  for  a  commodity  to  be  on  the  British  condi- 
tional contraband  list.  On  the  same  September  21 
the  Westerdyk  sailed  for  Holland  with  605  tons  of 
copper  in  her  cargo,  and  on  the  day  following  the 
Potsdam  went  out  with  1,805  tons.  These  were  all 
Holland-American  steamers. 

When  these  vessels  reached  the  English  Channel, 
Great  Britain  halted  every  one  of  them,  took  them 
into  British  ports,  and  detained  them  each  several 
days  while  their  copper  was  being  discharged.  This 
was  no  trifling  matter  to  the  vessels'  owners.  Great 
steamships  make  money  only  when  in  operation.  One 
day's  detention  for  a  vessel  like  the  Potsdam  or  the 
Rotterdam  means  a  loss  of  $2,000.    These  September 


176   ECONOMIC  ASPECTS  OF  THE  WAR 

and  October  seizures  of  the  Holland-American  boats 
were  sufficient.  The  company  learned  its  lesson,  and 
never  needed  to  be  taught  again. 

From  these  four  ships  England  took  a  total  of 
9,500,000  pounds  of  copper. 

These  seizures  could  be  justified  by  no  known  rule 
of  international  law.  So  long  as  copper  was  a  free 
article  of  commerce,  of  course  there  was  no  excuse 
for  interfering  with  it  on  its  course  to  Germany,  even 
directly.  Even  after  copper  had  been  declared  con- 
ditional contraband,  there  was  as  little  excuse  for 
seizing  it  when  destined  to  Germany  via  Rotterdam. 
The  Declaration  of  London,  Article  35,  provided  that 

"Conditional  contraband  is  not  liable  to  capture, 
except  when  foun'd  on  board  a  vessel  bound  for  terri- 
tory belonging  to  or  occupied  by  the  enemy,  or  for 
the  armed  forces  of  the  enemy,  and  when  it  is  not  to 
be  discharged  in  an  intervening  port," 

That  is,  when  conditional  contraband  for  the  enemy 
is  to  be  discharged  in  an  intervening  port,  such  as 
Rotterdam,  it  is  not  subject  to  interference.  Nor  is 
there  any  precedent  in  international  law — for  ex- 
ample, in  cases  where  treatment  of  conditional  con- 
traband has  come  before  the  courts — to  justify  the 
stoppage  of  such  traffic  to  a  belligerent  via  neutral 
ports. 

In  defense  of  the  stringent  British  policy  of  inter- 
fering with  supplies  for  Germany  via  adjacent 
neutrals  Great  Britain's  second  note  (of  February 
10)  in  answer  to  our  protest  of  December  26,  dwelt 


COPPER  AS  LAWFUL  COMMERCE     177 

upon  the  principle  of  "continuous  voyage"  as  applied 
to  shipments  into  the  Confederacy  during  the  Civil 
War,  in  our  so-called  Bermuda  cases. 

During  that  war  it  was  found  that  the  Confeder- 
acy was  drawing  large  quantities  of  supplies  from 
the  island  of  Nassau,  in  Bermuda.  It  appeared  that 
British  vessels  were  carrying  these  supplies  to  Ber- 
muda, where  the  cargoes  were  transhipped.  From 
Bermuda  small  blockade  runners  waited  their  chance 
to  slip  through  the  cordon  of  Federal  warships 
before  the  southern  ports.  Warships  of  the  United 
States  then  intercepted  British  vessels  bound  to 
Nassau  and  brought  them  before  our  prize  courts, 
where  all  their  Confederate  supplies  were  condemned, 
on  the  ground  that  the  ultimate  and  not  the  imme- 
diate destination  was  the  controlling  factor.  That  is, 
to  those  Confederate  goods  was  appHed  the  doctrine 
of  "continuous  voyage,"  previously  developed  in 
British  courts. 

But  it  is  to  be  noted  that  these  cases  referred  not 
primarily  to  the  application  of  contraband  law  with 
the  seas  open,  but  to  a  condition  of  blockade  and 
attempted  violations  thereof.  And  in  September  and 
October  of  1914  there  was  no  British  blockade  of 
Germany,  even  on  paper.*     Nor  were  the  captured 

*  Even  today  when  a  so-called  "blockade"  is  maintained, 
the  Bermuda  cases  are  no  justification  for  Britain's  stoppage 
of  our  exports  to  Scandinavia,  for  forwarding  to  Germany  by 
sea.  These  goods  are  to  be  forwarded  to  German  ports  which 
Britain  admittedly  does  not  blockade;  namely,  the  German 
ports  on  the  Baltic.  British  exports  to  Nassau  were  to  be 
forwarded  to  Confederate  ports  which  we  were  blockading. 


178   ECONOMIC  ASPECTS  OF  THE  WAR 

goods  destined  to  be  forwarded  to  Germany  by  sea. 
They  were  going  forward  by  land. 

This  fact — that  the  traffic  was  to  continue  to  Ger- 
many by  land — turned  our  Civil  War  precedents 
against  Britain.  In  the  same  British  note  of  Febru- 
ary 10  mention  was  made  of  the  Matamoros  cases, 
also  of  Civil  War  time.  The  Federal  war  vessels  held 
up  British  goods  destined  for  Texas  via  Matamoros, 
Mexico,  on  the  Mexican  bank  of  the  Rio  Grande. 
Brownsville,  opposite  Matamoros,  was  blockaded  by 
the  Federal  fleet;  Matamoros  obviously  was  not. 
Our  Supreme  Court  decided  that  we  might  seize  only 
the  contraband  on  board  such  ships,  and  then  only  if 
it  had  a  clear  destination  for  belligerent  use.  That 
is,  absolute  contraband  destined  overland  to  the  Con- 
federacy was  condemned,  but  all  other  goods  with  the 
same  destination  were  ordered  released. 

None  of  the  copper  seized  from  Dutch  boats,  while 
traveling  to  Germany  via  Rotterdam,  was  seizable 
under  these  precedents.  Copper  was  not  declared 
absolute  contraband  until  October  29. 

For  America  to  have  interfered  to  greater  extent 
than  described  with  the  lawful  traffic  between  Eng- 
land and  Matamoros  would  have  been  intolerable,  and 
would  never  have  been  suffered  by  Great  Britain. 
To  be  sure,  the  limitation  imposed  seriously  impaired 
the  tightness  of  our  blockade  of  the  Confederacy. 
But  we  had  something  other  than  our  own  wishes  to 
consider.    As  the  Supreme  Court  said: 


COPPER  AS  LAWFUL  COMMERCE     179 

"Neutral  trade  (*)  to  and  from  a  blockaded  coun- 
try by  inland  navigation  or  transportation  is  lawful 
and  therefore  that  trade,  between  London  and  Mata- 
moros,  with  intent  to  supply  goods  for  Texas  from 
Matamoros,  violated  no  blockade,  and  cannot  be 
declared  unlawful.  Such  trade  .  .  .  with  unre- 
stricted inland  commerce  between  such  ports  and  the 
enemy's  territory,  impairs  undoubtedly,  and  very 
seriously  impairs,  the  value  of  a  blockade  of  the 
enemy's  coast.  But  in  cases  such  as  that  now  in 
judgment,  we  administer  the  public  law  of  nations 
and  are  not  at  liberty  to  inquire  what  is  for  the  par- 
ticular advantage  of  our  own  or  another  country,'' 

England  in  September  and  October  was  not  main- 
taining a  blockade  of  Germany.  Even  had  she  main- 
tained one,  the  American  "continuous  voyage"  cases, 
which  she  calls  to  her  aid,  would,  if  they  had  any 
application  at  all,  declare  illegal  the  seizure  of  4,290 
tons  of  copper  from  the  Dutch  boats.  And  this  was 
true  quite  apart  from  the  further  question  as  to  a 
retroactive  decree  causing  the  condemnation  of  a 
free  article  of  commerce  by  declaring  it  conditional 
contraband  after  it  has  set  out  upon  its  voyage  on 
the  high  seas.  The  Sloterdyk  and  the  Rotterdam 
were  over  halfway  across  the  Atlantic  when  anathema 
fell  upon  their  copper  cargoes. 

It  must  not  be  supposed  that  the  injury  to  this 
country  was  in  any  way  measured  by  the  4,290  tons 
of  copper  illegally  seized.  That  copper  was  eventu- 
ally paid  for  by  the  British  Government.  But  Dutch 
consignees,  and  those  whom  they  represented,  sent 

*  All  but  absolute  contraband  trade. 


180   ECONOMIC  ASPECTS  OF  THE  WAR 

in  no  more  orders.  No  one  continues  to  order  what 
he  cannot  get.  The  purchase  by  Great  Britain  of 
9,500,000  pounds  of  copper,  for  which  payment  was 
made  after  a  long  delay,  was  a  poor  substitute  for 
the  cancelled  normal  trade  of  12,000,000  pounds 
monthly  with  Dutch  ports.  The  magnanimous  action 
of  His  Majesty's  Government  in  finally  paying  for 
the  copper  it  seized  did  not  support  the  men  and 
families  in  Butte  and  Ray  whose  markets  and  whose 
ultimate  employers  were  by  that  seizure  obliterated. 

Great  Britain  in  the  September  seizures  did  not  act 
without  law.  However,  what  she  acted  under  was  not 
international  law,  but  her  own  substitute  for  it; 
namely,  the  August  20  Order  in  Council. 

In  that  Order,  we  recall.  His  Majesty's  Govern- 
ment repudiated  the  principle  which  its  own  prece- 
dents had  done  the  most  to  create ;  namely,  that  con- 
ditional contraband  moving  to  the  enemy  territory 
is  immune  unless  the  captor  can  prove  that  it  is  des- 
tined for  the  enemy's  hostile  forces.  The  August 
Order  made  conditional  contraband  seizable  when 
moving  to  anyone  under  control  of  the  authorities 
of  the  enemy  state ;  which  obviously  banned  all  such 
traffic  going  to  Germany. 

Yet  this  would  not  have  aff'ected  the  copper  seized. 
It  was  moving  to  Germany  through  Holland,  and  was 
to  be  discharged  in  "an  intervening  port,"  w^hich, 
according  to  the  Declaration  of  London,  freed  it 
from  suspicion  as  to  its  possible  destination  for 
German  forces.  The  Order  in  Council  made  condi- 
tional contraband  for  Germany  by  indirect  routes 


COPPER  AS  LAWFUL  COMMERCE     181 

capturable  under  the  same  condition  as  if  it  moved 
direct.  In  plain  words,  it  was  capturable  if  it  moved 
at  all.  Under  this  "law"  the  Dutch  shipments 
described  were  seized. 

We  have  seen  that  in  September  measures  were 
taken  by  England  to  put  an  end  to  the  movement  of 
copper  through  Holland  to  Germany.  In  October 
and  November  came  the  turn  of  Italy  and  the  Scandi- 
navian countries  to  learn  that  they  too  must  not 
play  the  middlemen  for  German  buyers.  British 
representatives  in  tliis  country  could  report  that  in 
October  a  quantity  of  copper  far  in  excess  of  October, 
1913,  was  exported  from  the  United  States  towards 
the  neutral  countries  in  question. 

Exports  of  Copper  to  Neutral  Cottntries  Adjacent  to  Germany 
Comparison  for  October  1913  and  1914 

Increase  in 
Oct,  1913      Oct.  1914       Oct.  1914 

Country  Lbs,  Lbs,  Lbs. 

Holland 11,119,819    11,119,819  (decrease) 

Italy, 3,698,042     22,166,413     18,468,371 

*'Other  Europe'*       1,939,327     13,670,445     11,731,118 


Total 16,757,188     35,836,858     19,079,670 

It  is  noted  that  in  October  Holland  did  not  receive 
a  pound  of  copper.  That  country  had  been  disposed 
of  as  a  possible  purveyor  to  Germany.  The  Dutch 
had  learned  their  lesson.  The  Holland-American 
Line  would  accept  no  more  copper  for  carriage. 

Still  more  drastic  measures  were  adopted  toward 
Italy  and   Scandinavia   in   October,   November  and 


182   ECONOMIC  ASPECTS  OF  THE  WAR 

December.  In  October  and  November,  fourteen 
steamers  for  Italy  were  detained  and  their  21,403,- 
200  pounds  of  copper  piled  high  at  Gibraltar.*  In 
November  and  December,  thirteen  ships  for  Sweden 
were  stopped  by  England  and  12,555,200  pounds  of 
copper  taken  off.*  The  Swedish  copper  lay  in 
British  east  coast  ports. 

Every  pound  of  copper  with  neutral  destination 
seized  before  October  29,  the  date  of  declaring  copper 
absolute  contraband,  was  seized  illegally.  The  legal- 
ity of  such  action  as  to  shipments  that  were  already 
on  the  seas  on  October  29  is  doubtful,  even  assuming 
that  copper  may  properly  be  declared  absolute 
contraband. 

England  herself  had  appeared  to  feel  technically 
justified  in  her  September  and  early  October  seiz- 
ures of  Dutch-bound  copper  while  it  was  still  condi- 
tional contraband.  But  the  seizures  of  Swedish  and 
Itahan  consignments  promised  to  assume  so  vast  a 
scale  that  the  flimsy  structure  of  the  August  20  Order 
in  Council  and  the  September  21  contraband  list  did 
not  look  able  to  bear  them.  Moreover,  the  United 
States  on  October  22  addressed  to  England  a  pro- 
test, never  published,  on  its  interference  with  our 
commerce.  So  on  October  29  copper  was  made 
absolute  contraband. 

The  justice  of  considering  raw  copper  as  contra- 
band is  a  subject  worth  considering.  The  British 
Government  by  its  Order  in  Council  of  August  20 

*For  the  vessels  detained,  dates,  cargoes  and  destination, 
see  Appendix,  p.  323. 


COPPER  AS  LAWFUL  COMMERCE     183 

had  accepted  the  Declaration  of  London  as  binding, 
precisely  as  though  it  had  been  ratified  by  His 
Majesty,  except  for  certain  modifications.  That 
Declaration  gives  no  authority  for  considering  raw 
copper  contraband.  The  items  mentioned  by  Article 
22  in  the  first  class  (as  always  subject  to  treatment 
as  contraband)  are  all  manufactured  goods.  They 
do  not  include  materials  for  ammunition. 

According  to  Article  23,  this  list  could  be  in- 
creased by  proclamation  of  a  belligerent  so  as  to 
include  "such  articles  exclusively  used  for  war  as  are 
not  enumerated  among  the  eleven  groups  of  the  first 
class."  The  protocol  of  the  drafting  committee  indi- 
cates that  this  addition  was  to  care  for  possible 
future  inventions  or  discoveries.  The  committee 
admitted  that  it  had  specifically  included  in  the  con- 
traband list  all  known  items  that  properly  belonged 
there.  Raw  copper  was  of  course  known,  and  it  was 
not  included. 

When  not  a  belligerent,  His  Majesty's  Government 
has  demanded  more  emphatically  than  any  other  that 
the  contraband  list  should  be  restricted  in  war  time 
to  the  narrovv'est  possible  limits.  Great  Britain  has 
even  appeared  before  the  international  public  favor- 
ing the  total  abolition  of  contraband  lists.  Witness 
the  charge  of  Sir  Edward  Grey  to  the  British  Delega- 
tion to  the  Second  Peace  Conference  at  The  Hague: 

"His  Majesty's  Government  recognize  to  the  full 
the  desirability  of  freeing  neutral  commerce  to  the 
utmost  extent  possible  from  interference  by  belHger- 
ent  powers,  and  they  are  ready  and  wilHng  for  their 


184  ECONOMIC  ASPECTS  OF  THE  WAR 

part,  in  lieu  of  endeavoring  to  frame  new  and  more 
satisfactory  rules  for  the  prevention  of  contraband 
trade  in  the  future,  to  abandon  the  principle  of  con- 
traband of  war  altogether,  thus  allowing  the  oversea 
trade  in  neutral  vessels  between  belligerents  on  the 
one  hand  and  neutrals  on  the  other  to  continue 
during  war  without  any  restriction,  subject  only  to 
its  exclusion  by  blockade  from  an  enemy's  port.  They 
are  convinced  that  not  only  the  interest  of  Great 
Britain,  but  the  common  interest  of  all  nations  will 
be  found,  on  an  unbiased  examination  of  the  subject, 
to  be  served  by  the  adoption  of  the  course  suggested. 

"In  the  event  of  the  proposal  not  being  favorably 
received,  an  endeavor  should  be  made  to  frame  a  list 
of  the  articles  that  are  to  be  regarded  as  contraband. 
Your  efforts  should  then  be  directed  to  restricting 
that  definition  within  the  narrowest  possible  limits 
and  upon  lines  which  have  the  point  of  practical  ex- 
tinction as  their  ultimate  aim. 

"If  a  definite  list  of  contraband  cannot  be  secured, 
you  should  support,  and,  if  necessary,  propose  regu- 
lations intended  to  insure  that  nations  shall  publish, 
during  peace y  the  list  of  articles  they  will  regard  as 
contraband  during  war,  and  that  no  change  shall  be 
made  in  the  list  on  the  outbreak  of  or  during  hos- 
tilities.* 

"A  list  might  be  prepared  and  submitted  for 
adoption  by  the  Conference,  specifying  the  articles 
which  in  no  event  shall  fall  within  the  enumeration  of 
contraband,  e.g.,  mails,  foodstuffs  destined  for  places 
other  than  beleaguered  fortresses,  and  any  raw 
materials  required  for  the  purposes  of  peaceful  indus- 
try.    It  is  essential  to  the  interest  of  Great  Britain 

*  It  is  instructive  to  compare  this  statement  of  principle 
with  the  continued  British  action  in  this  war  of  expanding  the 
fixed  contraband  list  of  the  Declaration  of  London. 


COPPER  AS  LAWFUL  COMMERCE     185 

that  every  effective  measure  necessary  to  protect  the 
importation  of  food  supplies  and  raw  materials  for 
peaceful  industries  should  be  accompanied  by  all  the 
sanctions  which  the  law  of  nations  can  supply. 

"His  Majesty's  Government  would  further  be  glad 
to  see  the  right  of  search  limited  in  every  practicable 
way,  e.g.,  by  the  adoption  of  a  system  of  consular 
certificates  declaring  the  absence  of  contraband  from 
the  cargo,  and  by  the  exemption  of  passenger  and 
mail  steamers  upon  defined  routes,  etc." 

Obviously  the  British  Government,  when  It  pre- 
pares for  the  eventuality  of  being  a  neutral  in  war 
time,  is  no  believer  in  an  extended  contraband  list. 

If,  as  Sir  William  Ramsay  tells  us,  copper  is  less 
properly  considered  as  contraband  than  cotton  is, 
there  is  indeed  little  excuse  for  declaring  it  contra- 
band of  war. 

On  December  26  we  sent  England  a  note  protesting 
primarily  against  her  seizures  of  copper  on  the  high 
seas.  It  contained  only  the  following  reference  to  the 
inclusion  of  copper  in  the  absolute  contraband  list: 

"The  government  of  the  United  States  does  not 
intend  at  this  time  to  discuss  the  propriety  of  includ- 
ing certain  articles  in  the  list  of  absolute  and  condi- 
tional contraband,  which  have  been  proclaimed  by 
His  Majesty.  Open  to  objection  as  some  of  these 
seem  to  this  government,  the  chief  ground  of  the 
present  complaint  is  the  treatment  of  cargoes  of  both 
classes  of  articles  when  bound  to  neutral  ports." 

But  it  was  hardly  to  be  expected  that  our  authori- 
ties, while  accepting  the  listing  of  rubber  and  hides 


186  ECONOMIC  ASPECTS  OF  THE  WAR 

as  conditional  and  absolute  contraband,  respectively, 
would  protest  strongly  against  the  inclusion  of 
copper  in  the  absolute  list.  Copper  has  a  secondary 
connection  with  the  operations  of  war.  But  both 
rubber  and  hides  are  so  distantly  removed  from  war's 
uses  that  they  are  on  the  free  list  of  the  Declaration 
of  London. 

Had  copper  been  kept  off  the  absolute  contraband 
list  (it  was  off  the  first  three  months  of  the  war),  and 
if  conditional  contraband  had  been  treated  by  Britain 
as  in  previous  wars,  the  nearly  35,000  workmen  in 
American  copper  industries  laid  off  on  August  1 
would  have  soon  returned.  As  it  was,  these  men  were 
out  of  work  until  after  the  first  of  the  year.  Not 
until  April,  1915,  were  the  mines  and  refineries  work- 
ing to  75  per  cent  of  their  capacity.  Not  until  June 
were  they  fully  employed,  ten  months  after  the  lay- 
off on  August  1.  Senator  Walsh  of  Montana  de- 
clared in  the  Senate  at  the  end  of  December : 

"Multitudes  of  the  latter  (the  miners)  in  enforced 
idleness  must  make  such  provision  as  they  can 
against  the  rigors  of  an  inhospitable  winter  climate. 
No  little  destitution  must  follow,  and  great  indus- 
trial loss." 

Nor  did  the  loss  fall  entirely  on  the  workmen.  The 
Order  in  Council  of  August  20  cost  the  copper  export 
trade  $6,000,000  per  month,  the  average  exports  to 
Germany. 

Yet  in  the  early  part  of  the  war  our  main  com- 
plaint is  not  with  Britain's  declaring  copper  absolute 


COPPER  AS  LAWFUL  COMMERCE    187 

contraband.  Up  to  October  29,  1914,  the  period 
with  which  this  chapter  has  dealt,  we  protest  against 
the  illegal  treatment  of  copper  while  Great  Britain 
still  carried  it  on  her  free  or  conditional  contraband 
lists. 


CHAPTER  X 
Copper  as  Conteaband  of  Wae 

In  the  preceding  chapter  the  propriety  of  Britain's 
declaring  copper  absolute  contraband  of  war  was 
discussed.  Once  that  declaration  was  made,  on 
October  29,  and  once  it  was  accepted,  the  British 
Government  had  the  right  to  prevent  copper  from 
moving  to  Germany  direct  or  via  the  adjacent  Euro- 
pean neutrals. 

After  October  29  America's  chief  trials  and  losses 
sprang  from  the  extraordinary  severity  with  which 
England  proceeded  against  trade  with  neutrals.  In 
its  eagerness  to  intercept  all  such  trade  which  might 
by  any  chance  get  through  to  Germany,  Great 
Britain  went  far  towards  making  impossible  even 
bona  fide  shipments  to  neutrals.  The  severe  meas- 
ures which  England  took  included  the  imposition  on 
neutrals  of  re-export  embargoes,  the  subjection  of 
detained  neutral  shipments  to  unprecedented  delays 
in  the  prize  court,  and  finally  the  stoppage  of  our 
neutral  copper  trade  until  we  submitted  it  to  the 
complete  direction  of  the  British  Admiralty. 

The  other  neutrals  early  followed  the  example  of 
Holland  in  prohibiting  the  export  of  copper  from 
their  boundaries.  The  State  Department  at  Wash- 
ington, as  soon  as  the  September  copper  seizures 


COPPER  AS  CONTRABAND  OF  WAR   189 

began,  co-operated  in  the  attempt  to  induce  Euro- 
pean neutrals  to  lay  these  embargoes.  On  October 
5  the  following  Associated  Press  despatch  was  sent 
from  Washington : 

"Secretary  Bryan  at  once  set  to  work  to  obtain 
from  Holland,  Italy,  Spain,  Norway,  Sweden  and 
Switzerland  guarantees  that  copper  imported  from 
the  United  States  would  not  be  re-exported.  These 
guarantees  will  be  accepted  by  Great  Britain.  It  is 
believed  the  neutral  countries  will  not  hesitate  to 
approve  the  plan,  which  is  similar  to  that  already 
arranged  with  Holland  with  regard  to  foodstuffs." 

Yet  even  with  these  embargoes  in  existence,  neutral 
trade  was  difficult  to  carry  on.  It  is  recalled  that, 
according  to  the  August  Order  in  Council,  ultimate 
German  destination  of  a  consignment  to  a  European 
neutral  would  be  presumed  "from  any  sufficient  evi- 
dence" and  that  it  then  devolved  upon  the  neutral 
consignee  to  prove  that  the  shipment  was  not  going 
to  Germany.  The  difficulty  lay  in  knowing  what 
proof  of  innocence  would  be  satisfactory. 

For  example,  it  was  insisted  by  the  copper  trade 
that  all  of  the  copper  seized  at  Gibraltar  in  October 
and  November  was  destined  for  Italian  consumption. 
The  shipments  were  from  the  largest  and  most  re- 
sponsible firms  in  this  country,  such  as  the  American 
Smelting  and  Refining  Company,  the  United  Metals 
Selling  Company,  and  the  American  Metal  Company. 
The  consignees  were  the  largest  and  most  responsible 
consumers  in  Italy,  such  as  Corradini,  Naples ;  Schi- 
apparelH,  Turin;  Unione,  Genoa;  Trafilire  and  the 


190  ECONOMIC  ASPECTS  OF  THE  WAR 

Metallurgica,  Leghorn.  Moreover,  for  any  of  these 
dealers  to  have  re-forwarded  copper  to  Germany 
would  have  been  in  violation  of  an  Italian  law,  espe- 
cially enacted  to  prevent  such  occurrences. 

Yet  cargoes  unloaded  and  detained  on  suspicion — 
like  the  9,500  tons  at  Gibraltar — lay  for  indefinite 
periods  without  action  of  a  British  prize  court  and 
without  any  indication  of  what  was  to  become  of 
them.  The  first  of  this  Italian  copper  was  taken 
off  at  Gibraltar  on  October  26,  the  last  on  Novem- 
ber 18.  Through  December,  January  and  February 
and  into  March  these  cargoes  waited,  unapproached 
by  any  prize  court  proceedings.  Long  before,  the 
drafts  which  our  exporters  drew  against  these 
exports  had  been  returned  to  them  and  had  caused 
them  financial  embarrassment. 

Fortunately,  we  have  the  opinion  of  the  great 
English  jurist.  Sir  William  Scott,  with  regard  to 
the  propriety  of  these  leisurely  proceedings.  In 
giving  judgment  on  the  Madonna  del  Burso,  seized 
in  the  last  months  of  1797,  he  severely  condemns  a 
three  months'  delay  in  disposing  of  the  case. 

"It  would  be  highly  injurious  to  the  commerce 
of  other  countries  and  disgraceful  to  the  jurispru- 
dence of  our  own  if  any  persons,  commissioned  or 
noncommissioned,  could  lay  their  hands  upon  valu- 
able foreign  ships  and  cargoes  in  our  harbors,  and 
keep  their  hands  upon  them,  without  bringing  such 
an  act  to  judicial  notice  in  any  manner  for  the  space 
of  three  or  four  months.  The  complaints  which 
such  a  conduct  tolerated  by  this  country  would  pro- 
voke against  it  from  foreign  countries  are  not  to  be 


COPPER  AS  CONTRABAND  OF  WAR   191 

described;  and  it  is  not  very  easy  to  suggest  how 
the  real  honor  of  the  country,  connected  as  it  is  with 
its  justice,  could  be  defended  against  such  com- 
plaints." 

Further,  the  eminent  jurist  lays  down  the  prin- 
ciple that  a  belligerent  nation  which  is  in  the  exercise 
of  the  rights  of  war  is  bound  to  find  tribunals  for 
the  exercise  of  such  rights,  where  neutrals  should 
enjoy  speedy  and  unobstructed  justice.  He  dis- 
misses the  plea  that  the  "court's  full  calendar  pre- 
cludes rapid  trial,"  with  the  words : 

"It  is  no  secret  that  this  court  has  never  thought 
it  a  breach  of  that  equal  justice  which  it  owes  to  all 
suitors  to  suffer  a  cause  to  be  interposed  that  from 
its  magnitude  of  interests  or  other  circumstance  of 
just  weight  had  a  peculiar  claim  to  pre-audience." 

In  point  of  fact  the  copper  at  Gibraltar  never 
came  before  His  Majesty's  prize  courts.  It  was 
eventually  bought  by  the  British  Government  on 
March  18,  1915,  four  months  to  a  day  after  the 
last  consignment  of  it  had  been  seized,  and  nearly 
five  months  after  the  first  consignment  had  been 
captured.  Before  that,  the  British  Admiralty  had 
offered  to  buy  it,  but — a  rather  important  detail — 
at  less  than  the  cost  of  producing  copper.  The  offer 
was  thus  described  by  an  American  copper  official 
in  an  interview  in  the  Boston  News  Bureau  of 
November  30: 

"The  British  Government  not  only  blocks  our 
mining  companies  from  the  Italian  market,  but,  after 


192   ECONOMIC  ASPECTS  OF  THE  WAR 

having  seized  their  copper,  they  open  negotiations 
to  buy  it  and  intimate  that  they  are  prepared  to 
pay  for  it  a  price  that  will  net  the  shipper  about 
IOY2  cents  a  pound,  less  than  the  average  cost  of 
producing  copper  at  the  present  time." 

However,  on  March  17,  the  copper  men  in  this 
country  were  informed  that  their  representative  had 
made  an  arrangement  with  the  British  Admiralty. 
The  Admiralty  agreed  to  have  1,000  tons  of  the 
copper  that  was  held  at  Gibraltar  sold  on  the  Lon- 
don market.  The  rest  the  Admiralty  was  to  take 
at  an  agreed  price,  excepting  for  forty  tons  car- 
ried on  the  Ascot,  which  was  still  regarded  as  sus- 
picious. The  Americans  were  to  pay  the  expense 
of  transporting  the  copper  to  London  on  a  British 
government  collier. 

During  the  first  half  of  November,  the  copper 
exporters  were  desperate.  Domestic  consumption 
of  copper  was  at  a  low  ebb.  Steamship  lines  to 
European  neutrals  were  refusing  to  accept  it  for 
export  upon  any  condition.  The  British  Govern- 
ment was  finding  one  excuse  after  the  other  for 
detention  of  such  shipments ;  there  seemed  no  possi- 
bility of  fathoming  the  British  mind  and  discover- 
ing what  would  satisfy  it.  At  last  England  itself 
solved  the  mystery  and  cut  the  Gordian  knot  that 
had  baffled  the  copper  producers  and  even  the 
official  minds  at  Washington. 

Great  Britain  decided  what  its  own  intention  was 
and  what  would  satisfy  itself.  As  a  result  of  this 
decision,  Mr.   Gardner,   chairman   of  the  board  of 


COPPER  AS  CONTRABAND  OF  WAR   193 

Henry  R.  Merton  and  Company,  Limited,  of  Lon- 
don, the  world's  leading  copper  merchants,  arrived 
in  America  in  early  November,  with  peace  and  con- 
cord in  his  hand.  He  brought  with  him  a  glowing 
prospect  for  the  copper  interests,  a  prospect  of  the 
early  trade  revival  for  which  they  had  longed. 

The  story  of  Mr.  Gardner's  mission,  of  its  wide 
and  deep  bearings,  finally — to  the  credit  of  Ameri- 
cans— of  its  rejection  by  American  copper  people, 
is  an  honorable  chapter  in  our  history,  even  if  in 
the  spring  of  1915  we  were  forced  into  practically 
the  same  surrender  we  had  refused  in  the  fall  of 
1914. 

Under  the  conditions  brought  about  by  the  war, 
practically  the  only  copper  supply  available  for 
countries  that  did  not  produce  the  metal  was  the 
American  supply.  The  Merton  plan  was  a  very 
simple  one.  Mr.  Gardner  appeared  with  powers 
from  his  government  that  have  never  been  ques- 
tioned. England  would  agree  to  take  a  large  fixed 
monthly  output  of  copper,  upon  the  condition  that 
American  producers  should  ship  to  Europe  through 
no  other  channels  than  British  merchants. 

The  offer  was  indignantly  rejected,  and  on  No- 
vember 16  Mr.  Gardner  returned  to  London,  his 
prepared  documents  unsigned. 

Had  the  proposal  met  with  acceptance,  it  would 
have  meant  the  desertion  by  American  producers  of 
hundreds  of  old  customers  who  consumed  copper  in 
neutral  countries,  and  the  transferring  of  copper 
manufacturing  in  large  measure   from   these   coun- 


194   ECONOMIC  ASPECTS  OF  THE  WAR 

tries  to  England,  whicli  alone  could  get  the  raw 
material  freely.  It  would  have  meant,  further,  that 
England,  controlling  the  world's  supply  of  a  mate- 
rial necessary  for  the  manufacture  of  ammunition  for 
small  arms,  would  have  an  influence  of  very  special 
potenc}^  over  all  countries  not  then  at  war. 

While  these  events  were  transpiring,  there  was 
developing  a  copper  famine  in  neutral  Europe.  To 
be  sure,  England  was  theoretically  willing  to  let  the 
European  neutrals,  except  Holland,  receive  the  same 
monthly  amounts  of  copper  which  they  had  received 
in  1913.  The  British  Embassy  at  Washington  said 
in  a  note  handed  to  our  State  Department  on 
November  11 : 

"A  supply  of  copper  sufficient  for  normal  con- 
sumption in  neutral  countries  will  not  be  interfered 
with,  provided  adequate  guarantees  are  given  that 
the  copper  will  not  be  transhipped  to  enemy  coun- 
tries." 

Even  if  the  British  detention  policy  had  allowed 
the  neutrals  to  receive  their  normal  quotas,  these 
would  have  been  insufficient  for  their  needs.  Italy 
is  a  good  example. 

First,  Italy  was  arming.  This  meant  increased 
imports  of  copper  for  the  Italian  ammunition  fac- 
tories and  largely  explained  our  abnormal  shipments 
intended  for  Italy  in  October.  Moreover,  Italy,  like 
most  other  European  countries,  has  in  normal  times 
heavy  imports  of  copper  manufactures  from  Ger- 
many.     In    1912,    Italy    imported    $4,235,000    of 


COPPER  AS  CONTRABAND  OF  WAR   195 

copper  manufactures  and  electrical  apparatus  from 
Germany.  With  Germany's  importation  of  raw 
copper  checked,  that  country  naturally  ceased  ex- 
porting copper  manufactures,  retaining  all  the  raw 
product  available  to  her  industries  for  domestic, 
especially  military,  uses.  Italian  manufacturers  were 
therefore  called  on  to  supply  what  formerly  had  been 
imported,  in  products  of  copper,  bronze  and  brass. 
In  America  we  have  seen  the  sudden  growth  of  certain 
industries  after  imports  from  Germany  were  cut  off. 
In  Italy  it  could  not  have  been  different. 

The  normal  annual  Italian  consumption  of  copper, 
apart  from  that  contained  in  sulphate,  is  over 
40,000  tons.  In  sulphate,  20,000  tons  more  are 
used.  Copper  sulphate,  or  what  we  call  blue  vitriol, 
is  used  throughout  Europe  to  spray  vines,  for  the 
purpose  of  destroying  the  phylloxera  pest.  Italy 
needed  more  copper  from  us  to  make  the  copper 
sulphate  which  she  had  hitherto  purchased  from 
Germany.  She  also  needed  copper  to  make  sulphate 
and  other  products  for  France,  for  in  the  early 
months  of  the  war  the  French  copper  industry  was 
paralyzed.  The  high  price  of  copper  in  Germany 
had  induced  German  manufacturers  to  turn  over  to 
neutrals  (Italy)  the  filling  of  many  orders  which 
they — the  Germans — had  booked.  Finally  the  11- 
cent  price  of  copper  during  the  fall  months  tempted 
Italians,  like  other  good  merchants,  to  buy  stock  for 
the  future. 

England  itself  took  in  the  first  three  months  of  the 
war  a  vast  excess  of  copper  over  the  volume  for  the 


196   ECONOMIC  ASPECTS  OF  THE  WAR 

same  months  of  1913.  Italy,  in  process  of  arming, 
was  under  the  same  compulsion  to  have  more  copper ; 
perhaps  under  a  greater  one,  because  Italy  was  more 
dependent  than  England  upon  the  barred  German 
copper  industry.  England's  imports  of  copper 
from  us  in  August,  September  and  October  were  over 
64,000,000  pounds.  Including  these  imports,  and 
including  the  copper  diverted  from  Dutch  ware- 
houses and  the  quantities  taken  off  steamers  bound 
for  Dutch,  Scandinavian  and  Italian  ports,  England 
in  those  three  months  received  103,000,000  pounds 
of  copper,  an  increase  of  69,000,000  pounds  over 
the  same  period  in  1913.  In  August,  September 
and  October,  1914,  there  left  our  shores  for  Italy 
25,000,000  pounds  of  copper,  16,000,000  more  than 
in  those  months  of  1913.  England,  in  suspecting 
and  stopping  those  shipments,  was  refusing  to  allow 
Italy  an  increase  less  than  one-fourth  as  great  as 
England  itself  took. 

What  has  been  said  of  Italy's  need  for  extra 
copper,  and  the  famine  resulting  from  British  deten- 
tions, applies  with  equal  force  to  the  Scandinavian 
countries. 

We  have  instructive  evidence,  in  England's  own 
experience,  as  to  the  importance  of  a  stoppage  of 
supplies  from  Germany  in  stimulating  imports  by 
neutrals  from  other  countries.  In  parliament,  on 
November  17,  1914,  a  member  called  attention  to 
the  large  increase  in  exports  of  British  coal  to  Hol- 
land and  the  Scandinavian  monarchies.  The  mem- 
ber implied  that  some  of  this  coal  might  be  getting 


COPPER  AS  CONTRABAND  OF  WAR   197 

through  to  Germany,  and  adverted  to  the  fact  that 
Mr.  Asquith's  constituents  were  largely  interested 
in  the  mining  of  it.  Mr.  Asquith  explained  that  the 
increased  exports  were  "not  due  at  all  to  their  being 
ultimately  destined  for  Germany,  but  to  the  fact 
that  these  countries  (the  neutrals)  were  deprived 
for  the  time  being  of  the  supplies  they  have  been 
accustomed  to  receive  from  the  enemy  country." 

The  interests  of  the  British  exporters  of  copper 
manufactures  were  by  no  means  hindered  by  a 
policy  that  kept  every  other  country  from  getting 
copper  at  any  price,  while  the  British  market  was 
abundantly  supplied.  Neutral  manufacturers  found 
their  supplies  uncertain  as  well  as  high  in  price,  and 
could  not  give  the  guarantee  of  deHvery  which  the 
protected  English  manufacturer  could  give.  The 
British  exports  of  copper  manufactures  and  copper 
sulphate  mounted  steadily  in  the  fall  months  of 
1914. 

It  is  recalled  that  the  October  29  Order  in  Coun- 
cil prohibited  American  shipments  to  neutral  coun- 
tries "to  order."  This  prohibition  discouraged  the 
copper  trade  in  particular,  for  most  copper  exports 
are  so  consigned.  Even  if  destined  for  a  known 
buyer,  a  copper  shipment  is  consigned  to  the  order 
of  the  foreign  agent  or  banker  of  the  American 
shipper.  The  purpose  of  this  is  plain.  The  ultimate 
consignee  might  be  unable,  for  some  reason,  to  take 
dehvery  of  the  shipment  upon  arrival.  The  title 
then  remains  in  the  American  shipper.  Shipments 
"to  order"   allow  our  foreign  representative,  if  he 


198   ECONOMIC  ASPECTS  OF  THE  WAR 

thinks  best,  to  retain  possession  of  the  copper  until 
the  Italian  or  Swedish  consignee  has  satisfied  him 
with  regard  to  payment.  Once  this  assurance  is 
given,  the  representative  of  the  American  copper 
firm  orders  the  shipment  delivered  to  the  foreign 
buyer. 

Moreover,  large  American  dealers  regularly  carry 
heavy  stocks  abroad.  The  United  Metals  Selling 
Company  had  16,000,000  pounds  of  copper  in 
Europe  at  the  outbreak  of  the  war.  These  stocks 
are  replenished,  normally,  by  constant  shipments 
"to  order."  Shipments  so  coming  forward  may  go 
into  stock  or  be  diverted  to  buyers  as  buyers  are 
found.  Great  Britain  was  perfectly  familiar  with 
this  method  of  doing  business.  The  prohibition  of 
"to  order"  shipments  compelled  a  complete  readjust- 
ment of  the  method  of  marketing  and  financing 
copper. 

As  an  excuse  for  Britain's  detention  policy,  there 
came  from  London  continued  absurd  tales  of  at- 
tempts to  smuggle  copper  into  Germany  through 
the  neutral  countries  of  Europe.  Some  of  the  tales 
were  gross  plays  upon  popular  ignorance  of  steam- 
ship practice. 

For  example,  the  grave  suspicions  of  the  Allies 
were  declared  justified  when  copper  was  found  con- 
cealed under  a  shipment  of  oats,  in  a  ship  unloaded 
at  Marseilles.  On  November  21,  London  despatched 
to  American  papers  the  following  report : 

"The  Norwegian  steamer  Tyr  has  been  detained 
at  Glasgow,  according  to  a  despatch  to  the  Central 


COPPER  AS  CONTRABAND  OF  WAR   199 

News.  It  says  that  4,000  tons  of  copper  ore,  which 
is  contraband  of  war,  was  found  in  the  bottom  of 
the  Norwegian  steamer's  hold,  hidden  under  a  cargo 
of  general  merchandise." 

There  is  no  claim  made  in  either  case  that  the 
copper  in  question  was  not  upon  the  ship's  manifest, 
or  cargo  list,  open  to  inspection.  Copper,  being  the 
heaviest  of  all  cargo,  is  always  placed  in  the  very 
bottom  of  the  hold  to  insure  the  stability  of  the 
ship.  The  lighter  merchandise,  such  as  oats,  natu- 
rally is  placed  over  it  and  "conceals"  it.  Were 
copper  carried  on  deck  where  the  boarding  officers 
could  see  it  at  once,  the  ship  would  founder  before 
she  sailed. 

When  in  December  the  Italian  and  Swedish  steam- 
ship lines  resumed  the  carriage  of  copper,  they 
imposed  the  condition  that  none  should  be  "in 
transit"  and  none  should  be  consigned  "to  order." 
Moreover,  a  Swedish  shipment  would  be  accepted  only 
if  a  cable  had  been  received  from  the  home  govern- 
ment specifically  reciting  that  it  was  for  domestic 
consumption. 

But  even  the  sovereign  voice  of  the  state  expressed 
in  its  re-export  prohibition  laws,  and  the  certifica- 
tion of  cargo  by  Washington  Ambassadors  of  neu- 
trals, did  not  suffice  to  prevent  seizure  of  copper  by 
England.  On  December  28,  the  New  Sweden  and 
Soerland,  bound  for  Sweden,  were  diverted  to  Eng- 
lish ports  by  English  cruisers.  One  was  relieved  of 
730  tons  of  copper,  one  of  600  tons.  In  each  case 
the  shipment  was  accompanied  by  a  statement  from 


200   ECONOMIC  ASPECTS  OF  THE  WAR 

the  Swedish  minister  at  Washington  that  the  copper 
was  for  Swedish  use. 

At  last  the  State  Department  was  driven  to  pro- 
test. On  October  22,  they  had  sent  an  informal 
note,  never  made  public,  to  England.  The  events 
of  November  indicated  that  the  October  protest  had 
not  severely  touched  the  conscience  of  His  Majesty's 
Government,  that  sensitive  attribute  of  belligerent 
powers  to  which  appeal  is  so  generally  made  in  the 
state  documents  of  the  war.  As  little  was  accom- 
plished at  the  almost  daily  conferences  in  Washing- 
ton between  officials  of  our  Statement  Department 
and  the  British  and  French  Embassies,  devising  ways 
and  means  for  facilitating  the  trade  in  copper 
between  this  country  and  neutrals. 

Our  December  26  note  of  protest  to  England  was 
primarily  on  behalf  of  copper.  It  was  stated  that 
great  interests  in  this  country  were  being  deprived 
of  their  lawful  markets.  The  note  pointed  out  that 
England  was  going  beyond  the  limits  of  interna- 
tional law.  It  stated  that  Britain  did  not  seem 
willing  to  let  shipments  go  to  European  neutrals 
even  when  they  had  imposed  re-export  embargoes  on 
American  products.  British  interference,  our  note 
stated,  was  so  severe  that  a  legitimate  trade  in  cop- 
per was  suffering  greatly.  Therefore,  we  said, 
we  felt  justified  in  asking  for  information  as  to  the 
manner  in  which  England  proposed  to  carry  out 
her  policy,  in  order  that  we  might  determine  the 
steps  necessary  to  protect  our  citizens. 

On  January  7,  we  received  an  answer  from  Eng- 


COPPER  AS  CONTRABAND  OF  WAR   201 

land.  It  recited  the  fact  that  our  exports  of  copper 
towards  Italy  and  "Other  Europe"  from  August  1 
to  December  21  exceeded  those  of  1913.  It  then 
asserted  that  there  was  strong  presumption  that  this 
surplus  traffic  was  destined  for  one  of  England's 
enemies,  and  against  this  contingency  England  must 
protect  itself.  In  view  of  the  circumstances — the 
note  continued — surely  neither  the  government  nor 
the  people  of  the  United  States  could  expect  Eng- 
land to  strain  the  international  code  in  favor  of 
private  American  interests. 

This  January  7  note  was  a  preliminary  answer  to 
ours  of  December  26.  On  February  10,  a  final 
answer  was  despatched  to  us.  It  was  a  long  note 
with  plenty  of  general  discussion.  Mention  was 
made  of  copper  only  once  and  then  only  inciden- 
tally. The  note  opened  with  a  discussion  of  the 
reasonableness  of  the  American  complaint. 

"Towards  the  close  of  your  note  of  the  28th 
December  your  Excellency  described  the  situation 
produced  by  the  action  of  Great  Britain  as  a  pitiful 
one  to  the  commercial  interests  of  the  United  States, 
and  said  that  many  of  the  great  industries  of  the 
country  were  suffering  because  their  products  were 
denied  long-established  markets  in  neutral  European 
countries  contiguous  to  the  nations  at  war." 

The  British  note  then  proceeded  to  indicate  that 
American  claims  of  distress  due  to  the  war  had  been 
exaggerated.  It  demonstrated  that  apart  from 
cotton,  American  exports  were  getting  to  be  larger 
than  in  1913.     (This  was  due  chiefly  to  foodstuffs 


202   ECONOMIC  ASPECTS  OF  THE  WAR 

and  war  materials  sent  to  the  Allies.)  The  note 
stated  that  the  difficulty  of  shipping  to  neutrals  was 
probably  closely  connected  with  the  shortage  of  ship- 
ping on  the  seas,  due  to  the  tying  up  of  the  German 
merchant  fleet  and  the  detention  of  certain  British 
vessels  in  German  harbors.  It  explained  that  steam- 
ships nowadays  are  larger  than  they  were,  and 
harder  to  search.  It  said  that  plans  were  alleged 
to  have  been  made  to  move  copper  in  cotton  bales. 
It  explained  that  since  the  German  population  had 
become  identical  with  the  army,  all  food  for  Germany 
was  properly  stopped. — All  of  which  was  interesting 
but  in  no  way  contributory  to  a  solution  of  the 
copper  situation. 

Meantime,  events  were  working  to  the  end  which 
Great  Britain  desired :  the  submission  of  our  copper 
trade  to  her  control.  In  December  the  Italian 
Ambassador  in  Washington  received  a  proposal 
that  he  should  certify  that  copper  to  Italy  was  for 
domestic  consumption.  He  indignantly  rejected  the 
suggestion.  He  indicated  that  to  require  this  was 
an  affront  to  his  government,  which  had  already 
prohibited  the  export  of  any  copper  from  Italy. 
The  Ambassador  said,  "Italy  has  given  its  word  that 
no  copper  will  be  exported  from  its  boundaries,  and 
we  shall  do  nothing  from  here  to  appease  the  appar- 
ent doubt  of  our  integrity  in  the  mind  of  England." 

But  in  January  the  Ambassador  had  melted.  On 
January  7  the  following  was  announced  from  Wash- 
ington : 


COPPER  AS  CONTRABAND  OF  WAR   203 

"Although  the  Italian  Government  considers  that 
its  embargo  against  the  exportation  of  copper  is 
sufficient  guarantee,  it  has  decided  to  help  American 
shippers  in  getting  their  cargoes  across  the  Atlantic 
without  delay,  by  certifying  the  consignments  before 
they  leave  the  United  States. 

"Under  this  arrangement  the  Italian  Foreign 
Office  makes  an  investigation  of  the  business  of  the 
consignee  and  the  purpose  for  which  he  seeks  to  use 
the  import  of  copper.  On  learning  that  copper  is 
strictly  for  home  consumption,  it  authorizes  a  cer- 
tificate to  that  effect  to  be  issued  by  the  Italian 
Embassy  at  Washington,  which  is  submitted  to  the 
British  consul  at  the  port  where  the  shipment  is 
being  loaded." 

The  reason  for  the  Ambassador's  change  of  heart 
was  not  far  to  seek.  Copies  reached  this  country 
of  the  Italian  newspaper  La  Perseveranza,  dated 
about  the  first  of  the  year.  They  explained  that 
the  Italian  Metallurgical  Corporation,  which  sup- 
plies the  state  railways  and  the  army  and  navy,  had 
closed  five  works,  throwing  3,000  men  out  of  employ- 
ment. It  closed  them  because  of  a  lack  of  raw 
material  to  make  copper  tubes,  plates  and  ammuni- 
tion. 

On  February  22,  a  London  despatch  reported  the 
procedure  in  the  case  of  some  copper  bought  by  a 
Swedish  contractor  to  fill  a  contract  with  his  gov- 
ernment. The  copper  was  thrown  into  the  prize 
court  and  counsel  for  the  contractor  asked  for  an 
assurance  from  the  British  Government  that  it  would 
not  take  and  use  the  copper  before  the  case  was 
legally  settled.     The  Attorney  General  said  that  the 


204   ECONOMIC  ASPECTS  OF  THE  WAR 

British  Government,  while  it  was  prepared  to  act 
reasonably  in  the  matter,  could  give  no  such  assur- 
ance. If  the  Swedish  minister  desired  to  make  any 
representations,  he  added,  he  must  do  so  through 
the  Foreign  Office.  The  case  was  adjourned  on  the 
application  of  the  Attorney  General. 

To  be  sure,  British  copper  dealers,  known  to  the 
Admiralty  and  naturally  favored  by  it,  had  less 
difficulty  in  getting  into  neutral  countries  the  copper 
that  they  ordered  forwarded  from  the  United  States. 
For  example,  when  the  steamship  Italia  was  seized 
by  the  British  at  Gibraltar  on  November  8,  there 
were  aboard  two  consignments  of  copper  sold  to 
Schiapparelli,  Turin.  One  had  been  shipped  by  the 
American  Smelting  and  Refining  Company,  one  by 
the  United  Metals  Selling  Company.  The  United 
Metals  had  sold  through  the  mediation  of  an  Enghsh 
house.  The  American  Smelting  and  Refining  Com- 
pany had  sold  direct.  Only  the  United  Metals 
shipment  ever  got  past  Gibraltar. 

Such  incidents  as  tliis  Indicated  clearly  the  only 
safe  course  to  pursue.  Despite  the  original  repudia- 
tion of  the  British  monopoly  plan,  some  of  the 
exporters  had  made  concessions  such  as  selling 
through  British  agents.  After  such  plain  demon- 
strations of  the  good  results  of  such  a  policy,  others 
who  had  held  out  longer  began  similarly  to  see  the 
point. 

The  sentiments  of  the  exporters  are  well  expressed 
in  a  letter  from  one  of  them  early  In  April,  after  he 
had  submitted  to  the  English  monopoly. 


COPPER  AS  CONTRABAND  OF  WAR  205 

"We  are  simply  forced  to  take  the  action  because 
of  the  fact  that  some  $800,000  worth  of  our  copper 
was  held  at  Gibraltar,  and  also  because  some  of  the 
representatives  of  our  leading  competitors,  resident 
in  England,  signed  the  Agreement  some  two  months 
in  advance  of  our  signing.  We  held  out  as  long  as 
we  could,  chiefly  because  we  did  not  wish  to  give  up 
our  position  of  independence  in  the  matter  of  trading 
where  and  when  it  suited  us  best,  without  having  to 
consult  with  the  British  Government." 

Getting  no  relief  from  the  ofiicial  action  of  the 
State  Department  the  copper  men  had  finally  asked 
the  State  Department  to  authorize  them  to  deal 
with  the  British  Ambassador  directly.  Authorization 
was  given. 

Soon  after  the  middle  of  March  an  Agreement 
between  the  Americans  and  His  Majesty's  Govern- 
ment was  made.*  It  recited  that  England  would 
do  her  best  to  keep  copper  from  Germany  but  did 
not  desire  to  hinder  exports  to  neutral  countries 
whose  re-export  embargoes  were  found  effective. 
While  England  could  not  forego  her  right  of  search, 
she  was  willing  to  let  copper  proceed  to  destination 
if  the  terms  of  this  Agreement  were  fulfilled.  Ship- 
ments were  to  be  made  only  to  named  consumers 
(not  to  merchants)  in  the  neutral  countries  and 
copies  of  bills  of  sale  were  to  be  forwarded  to  the 
Admiralty.  Bills  of  sale  were  to  recite  that  the 
shipment  was  for  neutral  consumption.  Under  these 
conditions    copper   could   be   exported   to    Italy   or 

*  For  text  of  Agreement,  see  Appendix,  p.  324. 


1!( 


)(•)    IX'ONOMIC  ASPKCn^S  Ol'  nil":  WAR 


ScaiKliiiJivia.  I\\|)()rls  lo  oflur  iiciilrMl  coiiiilrlcs 
\\v\v  iiol  lo  Ik'  mndi"  fxccpl  siihjcci  lo  pcnnil  of 
tJK'  Hritlsli,  Adiiiirjillj.  ^'Sliipiuciils  ol"  copper  lo 
(J real  Hrlhiiii  or  lu-r  Allii's  nuiy  l)i'  nuulc  without 
ri'sl  lid  ion."' 

'I'lils  WMs  llu'  fonlrnci  sl^iu'd  l)y  Aiiu'rlcnn  copper 
ex])orl('rs.  This  was  the  coiisiinimal  loii  of  I  lie 
]Jrltlsh  (Iclciilloii  cainj)ai^n. 

What  was  I  he  icsiill  on  (Jermaii  niilllary  opei'a- 
lloiis  of  all  I  Ills  ()i-<;aiil/e(l  syslcm  of  aiinoyaiici', 
(ieleiilloii  and  loss,  desl;;iied  lo  keej)  copper  from 
reaclilii^'  (Jennaiiy  f^ 

IscoMoinlc  pi'cssiire  was  no  more  ell'eclive  In  I  he 
case  of  coppei-  Ihaii  In  I  he  case  of  cotton.  l<'rom 
London  and  from  ( 'openha«4H'n,  (Jeneva  and  Amsli'r- 
(him,  via-liondon  and  Paris,  pathetic  tales  were 
forwarded  of  schoolboys  in  (Jermany  h^'gging  door 
knojjs  foi-  I  lie  mllllai-y,  honsewlves  being  stripped  of 
copj)er  kellles  and  pans,  and  roofs  being  de-cop- 
jKTed.  IJul  those  wiu)  liad  been  in  (Jermany  told  no 
such   tales. 

(Jerman  copp(>r  consumption  in  lOl.'J  was  25(),()()() 
long  tons.  in  order  lo  keep  the  works  operating, 
the  (lerman  faclories  carry  a  slock  of  three  months' 
sup|)lles,  al)out  ()1<,()()()  tons.  IJccause  of  large 
imports  In  I  he  months  jusl  pri'cedlng  the  war,  it  is 
likely  that  on  August  1  a  supply  much  larger  than 
()1<,()()0  tons  was  on  hand  at  the  factories.  In  addi- 
tion h>  this,  on  Au<;ust  1  there  were  on  hand  In 
(Jerman  warehouses  1  (),()()()  tons.  (Jerman  raw  co})- 
per    production    in    ^9^'^    was    50,000    Ions,    and    no 


COPPER  AS  CONTRABAND  OF  WAR   207 

doubt  it  was  largely  expanded  after  the  war  began 
by  intensive  working  of  the  mines.  Probably  there 
were  readily  available  not  less  than  50,000  tons  of 
old  metal.  This  made  a  total  of  at  least  174,000 
tons  available  for  the  first  year.  Further,  the  needs 
were  reduced  by  the  halting  of  Germany's  large 
exports  of  copper  products,  amounting  in  1913  to 
125,850  tons,  and  the  interruption  of  internal 
electro-technical  developments. 

There  is  a  very  large  supply  of  old  copper  in 
Germany.  The  average  annual  consumption  in 
recent  years  has  been  225,000  tons  of  raw  copper 
and  average  exports  have  not  exceeded  100,000  tons, 
leaving  125,000  tons  every  year  in  the  country.  In 
case  of  need,  this  supply  would  care  for  mihtary  uses 
for  an  indefinite  period. 

A  vast  amount  of  scrap  metal  is  brought  forth 
by  a  rise  in  prices.  At  the  end  of  1914  the  German 
price  quoted  was  200  marks  per  kilo,  or  at  the  then 
rate  of  exchange,  20^/4  cents  per  100  pounds.  Scrap 
was  pouring  on  the  market  just  as  it  did  in  the 
eighties  when  Secretan's  copper  corner  failed.  Sec- 
retan  got  control  of  the  world's  supply  of  raw  cop- 
per, but  those  who  backed  him  could  not  finance 
the  purchase  of  the  huge  amounts  of  scrap  copper 
brought  forth  by  the  higher  prices  which  the  corner 
was  causing. 

A  large  quantity  of  copper  has  been  recovered 
from  used  ammunition,  and  taken  from  positions  cap- 
tured from  the  enemy.  No  one  has  yet  thought  of 
requisitioning    the    hundreds    of    thousand    tons    of 


208   ECONOMIC  ASPECTS  OF  THE  WAR 

copper  wire  on  the  street  railways  of  Germany. 
Before  they  are  touched,  the  wiring  and  roofs  of 
Belgium  and  Northern  France  will  be  stripped. 

Invention  of  substitutes  provide  still  another 
resource.  It  has  been  reported  that  Krupp  has 
invented  a  soft  steel  which  serves  very  well  in  place 
of  copper. 

One  is  tempted  to  subscribe  to  the  opinion  of  one 
of  the  leading  copper  dealers  of  America,  expressed 
at  the  end  of  December: 

"Without  denying  the  fact  that  the  cutting  off 
of  the  supplies  of  copper  is  annoying  to  the  highly 
developed  German  industry,  I  believe  it  is  of  minor 
importance  for  the  German  army  and  navy,  but  I 
am  sure  the  principal  sufferers  are  the  mine  owners, 
miners  and  smelters  in  this  country  w^ho  are  deprived 
of  their  best  market. 

"When  1914  statistics  are  going  to  be  available 
you  will  find  that  while  American  copper  production 
has  been  materially  reduced  owing  to  the  war  condi- 
tions, England  and  her  colonies  have  continued  to 
produce  without  any  serious  interruption;  in  other 
words,  America  though  neutral  and  disinterested  has 
to  foot  the  bill  for  England's  efforts  to  starve  Ger- 
many, while  the  real  profit  goes  into  the  pockets  of 
the  German  copper  mining  companies  and  scrap 
dealers. 

"England  has  gained  little,  America  has  lost  much, 
while  Germany  is  annoyed  without  being  hurt." 


CHAPTER  XI 

The  Export  Situation 

A  discussion  of  the  effect  of  the  Great  War  upon 
American  interests  would  be  lacking  if  it  were  not  to 
include  a  consideration  of  our  war  exports.  They 
demand  attention  for  several  reasons.  There  is 
general  misinformation  regarding  their  nature  and 
extent  and  regarding  the  prosperity  which  they 
promise  the  country.  The  large  extent  of  our  ex- 
ports during  the  war  period  has  been  frequently  cited 
in  the  notes  of  Great  Britain,  both  openly  and  by 
implication,  as  a  factor  which  should  influence  the 
minds  of  the  American  public  in  their  opinion  regard- 
ing the  stoppage  of  our  normal  trade  with  other 
belligerents  in  the  war.  Finally,  the  dependence  of 
the  Allies  upon  the  United  States  for  great  quanti- 
ties of  war  supplies,  especially  of  munitions,  gives  us 
a  vast  economic  power  which  might  be  used  by  this 
country,  under  clearly  demonstrated  necessity,  for 
the  protection  of  its  proper  rights  and  interests  upon 
the  seas. 

During  the  greater  part  of  the  fiscal  year  1915 
(the  year  ended  June  30),  our  exports  were  very 
large.  The  great  extent  of  exports,  together  with 
a  sharp  falling  off  in  imports — more  marked  than 


210   ECONOMIC  ASPECTS  OF  THE  WAR 

ever  since  the  "blockade"  of  Germany — resulted  in 
a  large  monthly  balance  of  trade  in  our  favor;  that 
is,  a  large  excess  of  exports  over  imports.  In  the 
five  months  ending  August,  1914,  we  had  an  adverse 
balance  of  trade  each  month,  meaning  greater  im- 
ports than  exports.  From  September  on,  exports 
exceeded  imports.  By  September,  1914,  those  fac- 
tors were  working  which  were  to  expand  our  foreign 
sales  to  very  large  totals,  and  which  operated  with 
increasing  effect  for  many  months.  This  develop- 
ment since  September  may  be  illustrated  as  follows : 

Exports  and  Imports  by  Months,  September  1,  1914 
TO  June  30,   1915 

Exports  Imports      Excess  of  Exports 

September...  156,052,333  139,710,611  16,341,722 

October 194,711,170  138,080,520  56,630,650 

November...  205,878,333  126,467,062  '^9,411,271 

December...  245,632,558  114,656,645  130,976,013 

January 267,879,313  122,372,317  145,506,996 

February 299,805,869  125,123,391  174,682,478 

March 299,009,563  158,040,716  140,969,347 

April 294,470,109  160,576,106  133,894,093 

May 273,768,093  142,284,851  131,483,242 

June 268,601,599  157,746,140  110,855,459 


This  increase  in  our  exports  was  entirely  to 
Europe  (including  England)  for  Europe  alone  had 
the  money  to  buy.  Other  continents  buy  from  us, 
normally,  with  money  loaned  by  Europe,  or  with  the 
proceeds  of  their  sales  to  Europe.  Since  the  war, 
the  monied  European  powers  have  been  so  drawn 
upon  by  war  expenses  that  they  have  had  no  surplus 


THE  EXPORT  SITUATION  211 

to  lend  away  from  home,  and  no  money  to  spend  for 
anything  but  the  necessities  of  Hfe.  Germany  was 
prevented  by  British  sea  power  from  getting  any- 
thing that  was  on  the  British  absolute  or  conditional 
contraband  hst,  and  this  included  nearly  every 
article  in  trade.  The  blockade  affected  other  large 
sellers  to  Germany  exactly  as  it  affected  us.  And 
when  the  purchasing  power  of  South  America,  for 
example,  is  crippled,  we  too  are  touched.  All  this 
meant  that  South  America,  Africa  and  Asia  could 
not  sell  their  chief  customers  nor  borrow  from  their 
customary  bankers.  Hence  they  had  no  money  with 
which  to  buy  from  us. 

It  is  this  condition  that  has  disappointed  the  opti- 
mists who  at  the  beginning  of  the  war  prophesied  that 
America  was  going  to  sell  to  the  oversea  world  what 
England  and  Germany  used  to  sell.  But  the  world 
in  question  could  not  buy  from  anyone.  So,  though 
we  may  sell  them  a  larger  proportion  of  their  whole 
purchases  than  formerly,  it  turns  out  that  our 
actual  sales  to  this  extra-European  world  are 
smaller  than  before  the  war.  International  trade  is 
a  great  co-operative  venture.  No  such  disturbance 
as  the  present  can  occur  among  certain  of  the  part- 
ners without  adversely  affecting  all  the  others. 

Our  increased  sales,  then,  have  been  to  Europe. 
But  the  increase  has  not  meant  for  us  that  prosperity 
which  it  would  bring  in  noiTaal  times.  Normally 
such  a  growth  in  exports  would  be  extended  to  our 
whole  field  of  industries  and  agriculture.  In  the 
present  case,  the  large  increase  in  some  articles  is  met 


212   ECONOMIC  ASPECTS  OF  THE  WAR 

by  a  large  decrease  in  others,  a  decrease  in  articles 
whose  producers  are  absolutely  dependent  for  their 
prosperity  upon  the  state  of  the  export  trade.  Such 
an  article  is  cotton. 

Our  exports  are  "spotty."  It  is  a  condition  that 
can  no  more  mean  prosperity  to  the  country  than  an 
industrial  community  can  be  called  prosperous  when 
a  part  of  its  men  are  working  overtime  earning  high 
wages  and  the  other  part  are  unemployed  and  grow- 
ing poorer  each  day. 

Contrary  to  the  general  impression,  our  main  ex- 
ports to  Europe  have  not  been  the  weapons  of  war. 
It  is  not  possible  to  find  the  exports  of  big  guns ;  they 
are  not  listed  in  the  government  statistics.  But  our 
ordnance  shipments  have  not  been  large.  For  the 
nine  months  from  September  1,  1914,  to  May  31, 
1915,  we  shipped  $34,000,000  of  munitions,  com- 
pared with  $6,000,000  in  the  same  nine  months  of  the 
previous  year.  In  munitions  are  included:  firearms, 
cartridges,  gunpowder  and  other  explosives  except 
dynamite.  The  increase  in  munitions  exports  is 
seen  to  be  only  $28,000,000.  To  be  sure,  shrapnel 
is  not  included  in  the  munitions  list;  it  also  cannot 
be  found  in  the  official  export  figures.  Even  if  we 
could  add  the  statistics  for  ordnance  and  shrapnel, 
the  larger  figure  would  not  go  far  towards  explain- 
ing the  vast  growth  of  our  export  balance  since 
November,  1914. 

The  explanation  for  our  great  increase  in  exports 
is  found  rather  in  the  group  we  call  food,  especially 
in  breadstuffs.     By  breadstuff's  are  meant  flour  and 


THE  EXPORT  SITUATION  213 

gram,  except  oats,  the  latter  cereal  being  more  cor- 
rectly classed  as  forage.  Some  of  the  reasons  why 
the  European  demand  for  our  food  was  especially 
heavy  have  already  been  noted.  Excepting  for 
North  America,  the  grain  crops  of  extra-European 
countries  in  1914  were  below  normal.  The  closing 
of  the  Dardanelles  and  German  control  of  the  Baltic 
held  the  great  Russian  and  Balkan  supplies  of  grain 
away  from  belligerent  Western  Europe.  Neutrals 
like  Scandinavia,  Holland,  Italy  and  Greece,  which 
had  always  bought  largely  from  the  Black  Sea,  now 
turned  to  America.  The  great  rise  in  the  exports 
and  the  price  of  breadstufFs,  especially  wheat  and 
wheat  flour,  were  reviewed  in  Chapter  II.  In  the  nine 
months  ended  with  May  we  shipped  $431,000,000  of 
breadstufFs,  compared  with  $107,000,000  in  the  pre- 
vious year.  The  growth  of  $324,000,000  showed 
that  the  disappearance  of  Germany  as  an  export 
market  for  our  wheat  was  far  more  than  counter- 
balanced by  the  great  demand  of  the  rest  of  Europe. 
In  this  one  item  the  growing  balance  of  trade  is 
chiefly  explained. 

In  the  case  of  meat  products,  a  similar  development 
occurred.  For  some  time  the-  communication  of  the 
Allies  with  the  Argentine  was  unsafe,  owing  to  Ger- 
man cruisers  in  the  South  Atlantic.  Even  when  those 
seas  were  cleared,  our  shipments  continued  large,  the 
vast  supplies  required  to  provision  the  armies  of  the 
Allies  causing  a  recovery  of  our  export  meat  trade, 
which  for  a  decade  had  been  on  the  decline.  The 
demands  for  a  fighting  army  are  far  above  those  for 


214   ECONOMIC  ASPECTS  OF  THE  WAR 

the  same  number  of  men  in  peaceful  occupations.* 
The  European  population  in  the  field  has  advanced 
to  a  scale  of  living  which.it  never  knew  before. 
Further  contributing  causes  to  the  large  meat  orders 
from  this  country  included  the  German  occupation  of 
part  of  the  producing  area  of  France ;  and  the  large- 
purchases  made  by  American  relief  bodies  on  behalf 
of  the  Belgians.  We  exported  in  the  nine  months 
$160,000,000  of  meat  products,  $54,000,000  more 
than  in  the  same  months  of  the  previous  year.  We 
sent  $11,000,000  of  dairy  products,  an  increase  of 
$9,000,000. 

A  similar  advance  was  in  our  shipments  of  sugar. 
The  stoppage  of  German  exports  to  England 
resulted  in  keeping  nearly  half  a  million  tons  of 
German  sugar  at  home,  where  it  was  made  into  cattle 
fodder.  England  therefore  had  to  turn  to  us  for  her 
supply.  To  prevent  a  too  great  increase  in  price, 
she  tried  the  experiment,  which  was  not  altogether 
happy,  of  a  government  monopoly  of  the  purchase 
and  distribution  of  sugar.  Our  sugar  exports  in  the 
nine  months  to  the  end  of  May  amounted  to  $21,000,- 
000,  which  was  $20,000,000  more  than  in  the  same 
months  of  the  year  before.  Finally,  there  was  a 
growth  of  $4,600,000  in  our  shipments  of  vegetables. 

In  forage  there  has  been  another  remarkable  in- 
crease. In  the  nine  months'  period  we  exported  $71,- 
000,000  of  forage:  oats,  hay,  cottonseed  cake  and 
meal.     This  was  $60,000,000  more  than  in  the  same 

*  Exports  of  canned  beef  have  increased  from  $350,000  to 
$9,900,000. 


THE  EXPORT  SITUATION  215 

months  of  the  year  before.  Five-sixths  of  the 
increase  was  in  the  item  of  oats  alone.  As  will 
appear  later,  our  exports  of  forage  were  paralleled 
by  our  shipments  of  horses  and  mules  to  eat  the 
forage ;  that  is,  to  eat  it  for  the  brief  period  during 
which  an  army  horse  or  mule  continues  to  enjoy  the 
gustatory  pleasures  of  this  world. 

Another  great  group  of  exports  was  hides,  leather 
and  footwear,  not  including  harness  and  saddlery, 
which  belong  better  in  the  category  of  war  supplies. 
The  largest  increase  was  in  unworked  leather  and 
miscellaneous  leather  products,  though  there  has  been 
a  notable  movement  of  men's  shoes  and  of  hides.  In 
the  whole  group  we  exported  $68,000,000  or  $48,- 
000,000  more  than  in  the  same  months  a  year  ago. 

Somewhat  closer  to  the  business  of  war  were  our 
exports  of  textile  manufactures,  mostly  the  result 
of  great  equipment  orders  from  the  Allies.  Probably 
the  largest  single  item  was  blankets,  then  woolen  uni- 
forms, then  cotton  knit  goods.  Of  these  items  and 
of  wool  and  woolen  rags  we  sent  abroad  $35,000,000, 
which  is  $30,000,000  more  than  last  year. 

Nearer  yet  to  the  direct  equipment  of  war  we  may 
make  a  group  called  mar  supplies.  It  includes 
horses,  mules,  harness  and  saddles,  aeroplanes,  com- 
mercial automobiles,  automobile  tires,  wagons,  gas 
oil  and  fuel  oil,  barbed  wire,  horseshoes  and  surgical 
appliances.  The  largest  increase  in  this  group  was 
in  the  means  of  transport :  horses,  mules,  commercial 
automobiles.  In  nine  montlis  ending  May  31,  1915, 
we  sent  to  the  war  250,000  horses,  compared  with 


216   ECONOMIC  ASPECTS  OF  THE  WAR 

18,000  in  the  same  period  of  the  year  before.  We 
sent  53,000  mules,  compared  with  4,000  in  1913- 
1914.  We  exported  $30,000,000  of  commercial 
automobiles,  which  is  $29,000,000  more  than  in  the 
previous  year.  In  the  whole  group  of  war  supplies 
we  sent  abroad  $148,000,000,  an  increase  of  $119,- 
000,000  over  the  year  before. 

It  is  apparent  that  up  to  the  present  time  our 
great  contributions  to  the  carrying  on  of  the  war 
have  been  indirect  contributions  rather  than  muni- 
tions. Greater  than  the  increase  in  munitions  ex- 
ports has  been  the  increase  in  material  for  making 
munitions.  Under  this  head  should  be  included  lead, 
zinc,  brass  and  brass  manufactures,  wire  rods,  steel 
billets  and  metal  working  machinery.  The  last  item 
means  lathes  for  turning  out  shrapnel.  American 
lathe  makers  have  been  totally  unable  to  meet  the 
demand  for  their  product  on  the  part  of  those  in  this 
country  and  abroad  who  have  shell  orders  to  fill. 
In  this  whole  group  the  exports  of  zinc — generally 
called  spelter — overshadow  all  others.  This  is 
because  the  German  and  Belgian  stocks  of  spelter, 
which  normally  supply  the  world  outside  the  United 
States,  are  cut  off  from  the  Allies.  Spelter  ac- 
counts for  over  one-third  of  the  increase  in  the  group, 
the  foreign  sales  of  which  amounted  to  $62,000,000 
in  the  nine  months  ending  May  31,  $46,000,000  more 
than  in  the  same  months  of  the  year  before. 

Combining  these  groups  and  comparing  them  with 
the  whole  exports  of  the  United  States,  we  have  a 
picture  of  the  present  situation. 


THE  EXPORT  SITUATION  217 

Exports  of  United  States,  Classified  Comparison  of  Nine 
Months'  Periods  Ending  May  31,  1914  and  1915 

Nine  Months    Nine  Months 
Ending  May    Ending  May         Increase 
31,  1914.  31,  1915  in  1915 

Group  I.     Munitions         $6,283,953       $34,421,595       $28,137,642 

Group  II.  Material 
for  making  muni- 
tions    16,291,624         62,360,423         46,068,799 

Group    III.       War 

Supplies 25,856,921        147,702,807       121,845,886 

Group  IV.      Textile 

manufactures 5,293,155         35,239,110         29,945,955 

Group  V.  Hides, 
leather  and  foot- 
wear    20,599,959         60,150,388         47,550,429 

Group  VI.  Food- 
stuffs          218,390,743       627,417,302       409,026,359 

Group  VII.     Forage         10,419,041         70,640,989         60,221,948 

Total,  Groups  I-VII       303,035,596    1,045,932,614       742,897,018 

All  other  Exports...    1,529,255,043    1,146,942,879       382,312,164* 

Total  Exports, U.S.  A.  1,832,290,639   2,192,875,493       360,584.854 

What  is  evident  is  that  our  total  exports  for  the 
nine  months'  period  did  not  grow  to  any  amazing 
degree.  There  was  a  shifting  of  our  output.  We 
were  making  and  selling  what  we  never  made  and 
sold  before.  We  were  not  selling  much  that  we  have 
always  sold.  A  huge  decrease  is  seen  in  the  exports 
of  articles  not  included  in  Groups  I-VII.  For  ex- 
ample, there  was  a  great  falling  off  in  cotton  exports, 
a  decrease  of  $216,000,000  for  the  nine  months' 
period.  Naval  stores  decreased.  Iron  and  steel 
manufactures  fell  off  $17,000,000.  Agricultural 
implements    decreased    $20,000,000,      Lumber    and 

*Decrease 


218   ECONOMIC  ASPECTS  OF  THE  WAR 

manufactures  of  wood  dropped  $41,000,00.  There 
were  similar  decreases  in  many  other  articles  such  as 
phosphate  rock,  mineral  oils,  electrical  machinery 
and  copper  (copper  fell  off  $36,000,000)  ;  though  the 
lower  exports  of  copper  were,  as  we  know,  finally  com- 
pensated by  higher  sales  at  home,  to  the  ammunition 
makers.  These  things  went  to  make  up  the  decrease 
of  $382,000,000  in  our  exports  outside  of  the  seven 
groups. 

It  may  be  doubted  whether  such  a  situation  is  a 
healthy  one.  It  is  a  poor  consolation  to  the  pinched 
cotton  farmers  to  know  that  the  ammunition  makers 
in  Bridgeport  are  working  day  and  night,  that  the 
machine  tool  works  in  Hartford  cannot  fill  their 
lathe  orders,  that  the  railroads  haul  trainloads  of 
war  auto  trucks  from  Detroit,  that  the  harness 
makers  of  Cincinnati  are  full  of  business,  or  even  that 
the  wheat  farmers  of  the  West  and  the  packers  of 
Chicaoro  are  rich.  Lumbermen  cannot  be  sliifted  to 
a  shoe  factory  and  the  tobacco  raisers  of  Kentucky 
and  Tennessee  are  not  trained  to  make  shrapnel 
shells.* 

*  On  August  5  a  New  York  importer  of  German  goods  said 
in  the  IS^ew  York  Times:  "England  says  that  the  money  that 
is  being  earned  by  manufacturers  of  arms  and  war  supplies 
should  be  a  compensation  for  the  losses  sustained  by  the  im- 
porters. But  let  me  say  that  if  I  were  to  go  to  any  manu- 
facturer who  has  earned  money  on  war  contracts  and  say  to 
him,  'Brother,  through  obeying  the  British  Order  in  Council 
I  have  lost  my  business,  money,  home  and  everything  I  possess 
in  the  world.  Will  you  kindly  let  me  have  $100,000  of  the 
fortune  you  have  made  on  war  supplies,  to  put  me  on  my 
feet?' — you  can  pretty  near  guess  his  answer." 


THE  EXPORT  SITUATION  219 

Until  those  who  sell  lumber,  tobacco,  phosphate 
rock,  cotton,  mineral  oil,  agricultural  implements, 
and  naval  stores  reach  their  accustomed  foreign 
markets,  we  shall  not  again  be  a  prosperous  country. 
It  is  noted  that  most  of  our  distress  products  come 
from  the  South.  To  a  large  degree  the  distress  of 
these  products  is  due  to  the  ban  which  England  laid 
upon  the  important  German  market.  The  removal 
of  that  ban  will  be  the  largest  single  step  towards  a 
return  to  prosperity. 

Nor  is  it  a  matter  for  the  South  alone.  Our 
inland  business  dwarfs  our  foreign  trade.  No  one 
knows  the  exact  figures  of  our  interior  exchanges  but 
it  is  estimated  that  the  volume  of  our  inland  trade  is 
sixty  times  the  volume  of  our  foreign  trade.  The 
figures  of  export  trade  are  published  by  the  govern- 
ment and  flashed  in  the  papers.  But  most  manu- 
facturers know  that  on  their  books  the  foreign  orders 
are  a  small  quota  of  the  whole.  Most  of  our  pro- 
ducers, especially  of  our  industries,  are  perhaps  sixty 
times  more  interested  in  market  conditions  at  home 
than  those  abroad.  The  fact  that  some  makers  of 
clothing  can  sell  to  Europe  does  not  compensate  the 
clothing  industry  for  not  being  able  to  sell  to  the 
South.  So  with  the  wagon  and  leather  industries. 
We  are  all  interested  in  the  state  of  the  South,  and 
in  its  relief,  not  merely  in  some  abstract  way  or  even 
from  humanitarian  motives.  We  are  also  interested 
because  we  want  the  South  to  be  able  again  to  buy 
from  the  rest  of  the  country. 


220   ECONOMIC  ASPECTS  OF  THE  WAR 

Our  main  problem  will  not  be  in  any  way  solved  by 
the  entrance  into  the  export  trade  of  the  vast  sup- 
plies of  ammunition  contracted  for  and  now  in  the 
course  of  manufacture.  They  will  go  simply  to  make 
the  rich  richer. 


CHAPTER  XII 

The  Import  Situation 

One  of  the  outstanding  features  of  this*  war  is-  its 
amazing  demonstration  of  the  economic  power  of 
England.  Once  Sir  Walter  Raleigh  said  that  the 
nation  which  controlled  the  shipping  of  the  world 
controlled  the  trade  of  the  world  and  so  the  world 
itself.  Sir  Walter  Raleigh  stated  the  principle ;  the 
proof  was  in  the  great  European  War. 

England  at  the  outset  of  the  war  owned  over  half 
the  merchant  shipping  in  the  world.  This  she  with- 
drew from  all  service  that  might  aid  her  enemies. 
She  controlled  the  marine  insurance  business.  The 
withdrawal  of  English  companies  from  participation 
in  the  underwriting  of  risks  on  German-American 
trade  was  one  of  the  obstacles  to  the  recovery  of  that 
trade.  The  London  discount  market,  through  which 
most  of  international  trade  had  been  financed,  was 
withdrawn  from  the  service  of  England's  enemies. 

All  this  was  a  legitimate  use  of  British  economic 
power.  For  a  belligerent  to  forbid  trading  with  the 
enemy  is  as  old  as  war  itself.  But  England  went 
further  than  this.  We  see  uses  of  her  power  that 
strike  us  as  more  novel.  The  British  naval  power  was 
used  so  to  threaten  with  starvation  the  neutral 
nations  of  Europe  that  they  agreed  not  only  not  to 


222   ECONOMIC  ASPECTS  OF  THE  WAR 

allow  goods  to  pass  through  their  territories  in  tran- 
sit to  Germany,  but  they  even  agreed  not  to  supply 
Germany  with  their  own  products.  Neutral  mer- 
chants submit  their  books  to  English  accountants 
who  satisfy  themselves  that  none  of  the  neutral  im- 
ports are  resold  into  Germany. 

Early  in  the  war  the  British  cut  the  German  cable, 
leaving  us  largely  dependent  on  British  and  French 
cables  for  communication  with  northern  Europe. 
When  Italy  entered  the  war,  our  dependence  was 
complete.  No  message  to  European  neutrals  is 
allowed  to  reach  its  destination  if  the  British  censor 
imagines  that  it  refers  to  a  transaction  that  may  be 
benefiting  Germany.  Sweden  has  complained  that 
this  exercise  of  the  censor's  imagination  has  seriously 
impaired  her  legitimate  trade  with  us.  In  August, 
1915,  the  packers  were  In  Washington  complaining 
of  the  cable  censorship.  They  complained  that,  after 
creating  the  Netherlands  Oversea  Trust  and  desig- 
nating it  as  the  sole  consignee  for  our  exports  to  Hol- 
land, Britain  was  refusing  to  let  our  cables  reach 
even  the  Trust. 

These  cases  represent  unprecedented  interference 
with  the  course  of  neutral  trade.  And  yet  Americans 
do  not  excite  themselves  unduly  because  of  what 
Britain  is  doing  to  Denmark  or  Holland,  even  though 
it  is  our  exports  which  are  there  being  subjected  to 
British  supervision. 

Another  set  of  cases  comes  nearer.  Some  of  them 
are  detailed  In  tills  chapter.  Rubber  from  the  British 
empire  was  witlilield  from  the  American  trade  until 


THE  IMPORT  SITUATION  223 

Americans  signed  an  agreement  not  to  manufacture 
rubber  goods — from  any  rubber  whatever — for  the 
enemies  of  England.     So  with  wool.    So  with  tin. 

Because  of  a  blockade  which  we  do  not  recognize, 
we  are  cut  off  from  imports  from  Germany,  and  we 
face  serious  industrial  disturbance  through  the  fail- 
ure of  the  potash  and  dyestuffs  supply. 

We  already  have  seen  that  the  Admiralty  forced 
our  copper  exporters  to  place  in  its  hands  the  direc- 
tion of  our  copper  trade.  The  Liverpool  Cotton  Ex- 
change now  apparently  blacklists  all  Americans  who 
do  not  sign  an  agreement  not  to  deal  with  the  enemies 
of  Britain. 

It  is  indicated  by  Great  Britain  to  the  steamship 
lines  carrying  our  exports  that  American  shipments 
to  neutral  countries,  if  approved  by  British  consuls, 
are  less  likely  to  be  detained.  Steamship  lines  refuse 
to  take  shipments  until  they  are  so  approved.  British 
consuls  in  American  ports  are  engaged  in  accepting 
affidavits  from  American  shippers  that  none  of  our 
exports  for  neutral  countries  will  get  through  to 
Germany ;  though  in  our  official  protest  to  England 
we  assert  that  for  us  to  accede  to  the  purpose  of  the 
ineffective  British  blockade  would  be  to  violate  our 
neutral  obhgation  to  trade  with  both  belHgerents. 

It  is  impossible  to  reach  this  point  without  feeling 
that  our  American  sovereignty  is  involved. 

In  1793  E.  C.  Genet,  an  agent  of  the  French 
Government,  was  operating  in  this  country,  France 
then  being  at  war  with  Great  Britain.  Thomas  Jef- 
ferson wrote  to  him  in  June,  1793 : 


224   ECONOMIC  ASPECTS  OF  THE  WAR 

"It  is  the  right  of  every  nation  to  prohibit  acts  of 
sovereignty  from  being  exercised  by  others  within 
its  Hmits,  and  the  duty  of  a  neutral  nation  to  pro- 
hibit such  as  would  injure  one  of  the  warring 
powers." 

It  is  not  far  from  an  act  of  sovereignty  when  a 
British  consul  decides  whether  we  may  ship  any- 
thing— contraband,  conditional  contraband  or  "free 
list" — to  neutral  countries  in  Europe.  When  this 
sort  of  sovereignty  is  permitted  and  is  exercised  for 
the  purpose  of  injuring  the  Germanic  Allies,  those 
Germanic  Allies  might  perhaps  justly  feel  they  have 
cause  for  complaint  against  us  as  a  neutral  nation. 

The  present  chapter  and  the  following  are  the 
story  of  the  strange  documents  we  had  to  sign  to 
get  certain  necessary  imports  from  the  British  em- 
pire or  even  from  the  neutral  world,  of  the  stoppage 
of  our  imports  from  Germany  and  Austria,  especially 
dyestufFs  and  potash,  and  of  the  pending  loss  to  our 
Federal  treasury  from  the  disappearance  of  custom 
revenues  from  German  goods. 

First  with  regard  to  imports  that  do  not  come 
from  Germany.  The  most  important  of  these  are 
rubber,  wool  and  tin.  At  least  part  of  our  supplies 
of  each  of  these  comes  from  British  colonies.  Great 
Britain  allows  us  to  get  supplies  from  British  colonies 
only  on  condition  that  our  manufacturers  refuse  to 
ship  to  Germany  either  these  materials  or  the  prod- 
ucts of  them.  In  practice  we  may  not  ship  raw 
materials  or  their  products  even  if  the  materials  do 
not  come  from  British  colonies ;  even  if  they  come 


THE  IMPORT  SITUATION  225 

from  the  United  States  itself.  This  pohcy  of  Great 
Britain  has  been  aided  by  her  manipulation  of  the 
contraband  list,  particularly  by  her  making  absolute 
contraband  of  wool  and  rubber,  both  on  the  free  list 
of  the  Declaration  of  London. 

The  United  States  normally  consumes  about  one- 
half  the  world's  output  of  rubber,  whose  production 
has  increased  rapidly  with  each  succeeding  year. 
Over  half  of  our  material  is  grown  in  British  colonies. 

Apart  from  the  obstacles  in  finance  and  transpor- 
tation, soon  overcome,  there  was  no  difficulty  in 
getting  rubber  in  the  early  months  of  the  war.  In 
August,  1914,  we  received  6,500,000  pounds  less 
rubber  than  in  the  previous  August,  but  after  that 
month  our  imports  steadily  reached  higher  figures 
than  in  the  corresponding  period  of  the  previous 
year  with  the  single  exception  of  January,  which  will 
be  explained. 

The  chief  excitement  in  the  rubber  trade  during 
the  first  four  months  of  the  war  was  provided  by  the 
exploits  of  the  German  cruiser  Emden,  which  in  the 
course  of  her  destructive  career  sank  two  dozen  mer- 
chant vessels,  three  of  them  carrying  $1,000,000 
worth  of  rubber.  The  indirect  influence  which  the 
Emden  exerted,  in  the  way  of  discouraging  shipments 
from  Ceylon  and  Singapore,  was  considerable.  When, 
the  cruiser  was  sunk  November  10,  rubber  prices  de- 
clined, because  these  Far  East  supplies  were  free  to 
move.  Values  were  soon  to  recover,  however,  because 
of  England's  embargo  on  the  exportation  of  rubber 
from  the  British  empire. 


226   ECONOMIC  ASPECTS  OF  THE  WAR 

On  September  21,  London  had  declared  rubber  and 
rubber  goods  to  be  conditional  contraband,  making 
it  impossible  for  our  dealers  to  export  rubber  and  its 
products  to  Germany,  and  difficult  to  ship  it  to  adja- 
cent neutrals  because  of  the  suspicion  which  England 
cast  upon  such  cargoes.  For  example,  the  rubber 
and  copper  for  Italy  in  the  cargo  of  the  American 
steamship  Kroonland  led  England  to  unload  this 
steamer  partly  and  subject  her  to  a  long  detention  at 
Gibraltar  near  the  end  of  October.  On  October  29 
rubber  tires  were  made  absolute  contraband. 

Still  England  was  not  content.  The  British  offi- 
cials believed  that  rubber  goods  and  raw  rubber 
were  going  through  to  Germany  from  this  country, 
via  adjacent  neutrals,  under  false  declarations  on  the 
ship  manifests.  Therefore  on  November  12  the  ex- 
portation of  raw  rubber  was  forbidden,  from  all 
parts  of  the  British  empire  to  all  destinations  except 
England.  The  rubber  trade  at  once  became  worried 
and  appealed  to  the  State  Department.  The  State 
Department  did  not  seem  able  to  help  the  situation^ 
and  though  American  dealers  offered  re-exportation 
guarantees  as  a  condition  of  being  allowed  to  receive 
raw  rubber.  Great  Britain  seemed  unwilling  to  accept 
them. 

Because  of  the  large  volume  of  rubber  on  the  seas 
for  America  at  the  end  of  November,  this  prohibition 
did  not  at  once  affect  our  receipts.  Not  until  Janu- 
ary did  the  imports  sink  below  the  corresponding 
month  of  the  year  before.  Meantime,  however,  the 
rubber  trade  was  getting  alarmed.    The  Rubber  Club 


THE  IMPORT  SITUATION  227 

issued  a  statement  saying  that  the  employment  of 
250,000  men  was  imperiled,  and  that,  if  the  embargo 
continued,  half  of  the  65,000  tons  of  rubber  which 
the  trade  needed  for  1915  would  be  cut  off. 

By  the  end  of  December  a  peculiar  problem  had 
arisen,  due  to  the  high  prices  ruling  and  the  uncer- 
tainty as  to  how  long  the  embargo  would  last.  It 
was  apparent  that  if  the  embargo  continued  long 
there  would  be  a  large  accumulation  of  raw  rubber  in 
the  British  market,  and  that  the  release  of  this 
supply  would  so  depress  the  price  as  to  occasion 
serious  loss  to  prudent  American  manufacturers  who 
had  bought  supplies  at  the  higher  December  prices, 
compared  with  those  who  took  a  risk,  waited  until  the 
ban  was  lifted  and  later  bought  their  rubber  cheaper. 

In  December  the  large  rubber  interests  arranged 
that  B.  G.  Work,  president  of  B.  F.  Goodrich  and 
Company,  should  visit  London  and  attempt  to 
arrange  for  rubber  imports  into  this  country.  He 
found  the  British  Government  none  too  eager  to  co- 
operate with  him,  because  of  its  conviction  that  rub- 
ber goods  were  reaching  British  enemies  fi-om  the 
United  States,  and  because  of  what  it  evidently  con- 
sidered as  the  suspicious  action  of  the  American 
Government  in  withholding  the  publication  of  ships' 
manifests  for  thirty  days  after  the  ship  sailed. 
Nevertheless,  the  negotiations  of  Mr.  Work  were 
successful,  partly  owing  to  a  promise  on  the  part  of 
the  Rubber  Club  and  the  Rubber  Association  of 
America  jointly  to  seek  the  co-operation  of  the 
Treasury  Department  in  investigating  and  prevent- 


228   ECONOMIC  ASPECTS  OF  THE  WAR 

ing  illicit  practices,  such  as  false  declarations  of 
exports  to  neutrals  adjacent  to  Germany. 

In  liis  January  7  note,  Sir  Edward  Grey,  in 
answer  to  our  protest  of  December  26,  speaks  of  an 
arrangement  by  which  Americans  were  to  be  allowed 
to  get  rubber.  Under  proper  guarantees,  provi- 
sional licenses  to  ship  to  the  United  States  were,  he 
said,  being  granted  to  British  rubber  exporters. 

On  January  8  Washington  despatches,  inspired  by 
the  British  Embassy,  announced  the  conditions  which 
Americans  must  fulfill.  Large  manufacturers  were 
allowed  to  have  rubber  consigned  to  them  direct, 
upon  condition  of  their  giving  a  bond  in  London 
which  would  be  forfeited  if  they  were  caught  export- 
ing or  allowing  exportation  to  Europe.  American 
dealers  in  rubber,  as  distinct  from  manufacturers, 
were  to  be  allowed  to  get  rubber  only  by  having  it 
consigned  to  a  New  York  bank,  to  be  delivered  to  the 
buyer  when  he  filed  with  the  British  consul  general 
in  New  York  a  guarantee  against  re-export  which 
was  satisfactory  to  that  official. 

The  leading  manufacturers  in  the  country  signed 
a  guarantee,  undertaking  not  to  sell  or  export  any 
raw,  waste  or  reclaimed  rubber,  except  to  England 
and  British  possessions.  Raw  rubber  then  in  the 
hands  of  American  producers  was  to  be  used  in  their 
factories,  and  not  sold  to  anyone.  The  manufacturer 
bound  himself  to  execute  no  orders  for  manufac- 
turered  goods  for  any  enemy  of  Great  Britain. 
Orders  for  European  neutrals  were  to  be  filled  from 
stocks    previously    accumulated    in    Europe,    or,    if 


THE  IMPORT  SITUATION  229 

manufactured  in  America,  were  to  be  shipped  first 
to  London  and  re-exported  thence  under  license.  A 
distinctive  mark  was  to  be  put  upon  all  products 
exported  or  sold  for  export  and  notice  was  to  be 
given  to  His  Majesty's  consul  general  of  shipments 
destined  for  non-European  countries.  The  manu- 
facturer pledged  himself  not  to  sell  rubber  manu- 
factures to  any  person  in  the  United  States  without 
first  ascertaining  that  the  person  would  not  export 
the  goods  to  Europe  except  to  Great  Britain  or  her 
AlHes. 

This  guarantee  was  published  in  May  by  the 
Rubber  Club,  with  a  request  to  customers  to  co- 
operate with  the  manufacturers  in  preventing  rubber 
from  getting  to  the  Teutonic  Allies,  and  so  avoiding 
a  second  British  embargo. 

But  more  than  good  will  on  the  part  of  dealers 
was  required.  The  manufacturers,  having  obligated 
themselves,  proceeded  to  bind  their  customers,  the 
latter  being  required  to  sign  an  agreement  of  which 
the  following  is  a  copy : 

"We  hereby  agree  that  any  quotation  asked  for, 
and  any  purchases  made  by  us  from  you  or  another 
of  any  of  your  products,  shall  be  in  each  and  every 
case  only  for  domestic  use  or  shipment  to  Great 
Britain,  France  or  Russia.  We  pledge  ourselves  to 
this  fact,  and  agree  that  the  execution  of  this  docu- 
ment shall  be  binding  on  us  for  such  length  of  time  as 
you  shall  consider  it  to  be  effective,  and  cancellable 
only  by  you. 

"We  further  agree  to  submit  to  any  and  all  inves- 
tigations that  may  be  necessary  on  your  part,  and 


230   ECONOMIC  ASPECTS  OF  THE  WAR 

to  give  free  access  to  any  and  all  of  our  books,  If 
called  on  so  to  do,  to  establish  the  fact  of  our  non- 
exporting,  or  selling  to  another  to  export,  in  viola- 
tion of  this  agreement. 

"And  further,  we  agree  that  any  order,  even 
though  accepted  by  you,  may  be  cancelled  without 
redress  on  our  part  at  your  option,  for  any  cause 
whatsoever,  during  the  period  that  a  state  of  war 
exists  abroad,  between  Great  Britain  and  any  other 
country. 

"In  case  we  tender  any  order  that  is  for  shipment 
out  of  this  country,  we  will  in  each  instance  state 
thereon  its  destination." 

It  will  be  noted  that  the  guarantee  signed  by  the 
manufacturers  with  the  British  Government  bound 
them  not  to  manufacture  any  goods  for  the  enemies 
of  Great  Britain,  whether  made  of  British-grown 
rubber  or  not.  It  is  supposable  that  a  manufacturer 
might  have  refused  to  sign  the  agreement  on  the 
ground  that  it  was  a  combination  in  restraint  of 
trade,  and  might  have  declared  that  he  would  work 
with  Brazil  rubber  and  sell  his  products  where  he 
chose.  But  Brazilian  rubber  is  of  a  different  quality 
from  plantation  rubber  from  Ceylon  and  the  Straits ; 
and  manufacturers  cannot  do  without  the  British 
material. 

Moreover,  without  signing  the  agreement  with  the 
British  Government,  no  American  manufacturer 
could  get  Brazilian  rubber.  The  product  of  Brazil 
could  get  to  the  United  States  at  this  time  only  via 
England;  or,  if  it  came  direct,  via  the  Booth  Line. 
But   the   Booth  Line  was   an  English  concern   and 


THE  IMPORT  SITUATION  231 

would  accept  no  rubber  for  New  York  unless  con- 
signed to  the  order  of  the  British  consul  general. 
The  latter  would  deliver,  naturally,  only  to  the 
faithful. 

It  is  true  that  rubber  or  its  manufactures  did  get 
into  the  hands  of  dealers  who  would  have  been  wilHng 
to  sell  to  Germany.  But  they  could  not  ship  it. 
There  were  no  steamship  Hues  to  Germany,  and  from 
September  21,  when  rubber  was  declared  conditional 
contraband,  the  lines  to  adjacent  neutrals  had  re- 
fused rubber  that  by  any  chance  might  be  destined 
for  Germany,  out  of  fear  that  its  presence  on  board 
would  subject  their  ships  to  long  detention  by  the 
British  cruisers. 

After  American  manufacturers  were  prohibited 
from  exporting  to  neutral  countries  except  via  Eng- 
land, hues  to  those  countries  refused  to  accept  arti- 
cles with  any  rubber  in  their  composition,  even 
rejecting  American  exports  of  carpet  sweepers  and 
of  the  harmless  necessary  clothes  wringer. 

The  export  of  American  automobiles  and  motor 
cycles  to  European  neutrals  was  greatly  hindered, 
because  their  tires  were  not  allowed  to  go  with  them. 
A  motor  cycle  for  a  customer  in  Sweden  had  to  be 
shipped  to  him  without  tires.  The  American  com- 
pany found  it  necessary  to  deliver  the  tires  from 
stock  in  England,  or  to  send  the  tires  to  its  London 
agent  with  instructions  to  request  a  license  for  their 
shipment  to  the  Swedish  buyer.  Whether  the  tires 
were  allowed  to  be  exported  depended  upon  the  state 
of  mind  of  the  duly  authorized  British  official.     If 


232   ECONOMIC  ASPECTS  OF  THE  WAR 

the  official  thought  that  the  name  of  the  Swedish 
buyer  had  a  German  sound — and  most  Scandinavian 
names  have  to  British  ears — he  would  refuse  the  tire 
license  and  the  Swedish  buyer  would  find  himself  with 
an  automobile  or  a  motor  cycle  for  which  he  had  no 
particular  use.  If  he  was  wise,  next  time,  he  would 
order  his  motor  cycle  from  England,  whence  the 
motor  cycle  would  not  be  exported  unless  the  tires 
were  licensed  to  follow.  The  acquaintance  of  the 
British  license  officer  with  the  British  exporter  gave 
the  exporter  the  opportunity  to  explain  that  it  was 
a  racial  and  not  necessarily  a  personal  or  business 
relationsliip  between  a  gentleman  in  Gothenburg  and 
a  gentleman  in  Hamburg  which  made  their  names 
sound  alike. 

Naturally,  the  market  for  rubber  products  which 
our  manufacturers  had  built  up  in  European  neutral 
countries  disappeared,  excepting  so  far  as  the  British 
would  still  allow  us  to  supply  that  market  through 
English  agencies ;  and  for  tliis  loss  an  increase  in  our 
exports  to  the  Allies  could  be  hardly  a  legitimate 
compensation. 

On  December  23  Great  Britain  declared  rubber 
and  its  products  absolute  contraband.  To  be  sure, 
this  was  practically  no  more  effective  than  the  ruling 
of  September  21  which  made  such  goods  conditional 
contraband.  But  just  as  in  the  case  of  copper, 
placing  rubber  in  the  absolute  contraband  list  was 
designed  to  "keep  the  record  straight." 

Rubber  is  one  of  the  items  on  the  free  list  of  the 
Declaration  of  London.     That  is,  it  is  so  necessary 


THE  IMPORT  SITUATION  233 

for  the  arts  of  peace,  and  has  so  httle  direct  connec- 
tion with  the  uses  of  war,  that  nations  are  forbidden 
to  hinder  its  movement  to  a  belhgerent.  There  is 
nothing  in  the  use  of  rubber  today  that  was  not 
known  in  1909 ;  hence  the  reasons  for  hsting  it  as  a 
free  article  of  commerce  must  still  exist. 

And  when  one  examines  the  connection  of  rubber 
with  the  operations  of  war,  the  justification  for  de- 
claring it  contraband  does  not  appear.  One  of  the 
uses  of  rubber  is  for  automobile  tires.  These  tires 
may  be  used  upon  machines  that  are  part  of  the 
military  equipment  of  the  enemy.  Rubber,  just  as 
oils,  hides  and  copper,  should  be  free,  listed  accord- 
ing to  the  Declaration  of  London,  an  international 
code  to  which  Great  Britain  was  the  leading  con- 
tributor. 

As  to  Great  Britain's  course  in  restricting  our  re- 
export of  rubber  goods  made  from  British  materials, 
this  embargo  must  be  accepted  as  a  necessary  incident 
of  war,  on  the  ground  that  for  Britain  to  allow  such 
trade  would  be  to  allow  an  indirect  form  of  "trading 
with  the  enemy."  But  for  a  system  that  prevents 
us  from  furnishing  without  hindrance  rubber  and 
rubber  goods  to  European  neutrals,  and  from  fur- 
nishing to  Germany  Brazilian  rubber  and  such  prod- 
ucts as  we  can  make  from  other  than  British  ma- 
terials, there  is  no  logical  defense. 

As  for  the  British  measures  exerting  any  pres- 
sure upon  Germany  which  will  influence  the  out- 
come or  duration  of  the  war,  this  is  out  of  the  ques- 
tion.    Not  even  in  England  does  anyone  think  of 


234  ECONOMIC  ASPECTS  OF  THE  WAR 

that.  As  usual,  the  pressure  is  being  exerted  upon  a 
civil  population,  and  upon  the  manufacturers  in  Ger- 
many and  elsewhere  by  whom  this  population  is  sup- 
plied. At  the  outbreak  of  the  war  all  tires  in  the  em- 
pire are  said  to  have  been  commandeered  for  the  use 
of  the  military.  Does  anyone  think  that  there  were 
not  enough  tires  in  Germany  to  serve  the  military 
for  an  indefinite  period?  In  a  country  with  such  an 
old  and  developed  rubber  industry  there  is  a  great 
store  of  old  rubber  which  can  be  reclaimed  and  used. 
Finally,  synthetic  or  artificial  rubber  is  a  fact,  not 
an  experiment.  It  cannot  yet  be  produced  so  as  to  be 
a  commercial  competitor  of  natural  rubber,  but  with 
the  element  of  cost  disregarded,  it  can  be  produced 
in  large  quantities.  In  the  production  of  synthetic 
rubber  for  military  purposes  cost  is  not  considered. 
So  much  for  rubber.  The  history  of  wool  is  simi- 
lar. Of  the  wool  which  our  manufacturers  make 
into  dress  goods  and  manufactured  clothing,  we 
import  more  than  we  produce.  Our  imports  fall 
into  two  divisions:  Class  I  and  Class  II  wool,  which 
are  the  finer  sorts  used  for  clothing  and  blankets; 
and  carpet  wool.  Carpet  wool  comes  from  China, 
Russia  and  Turkey.  Russia  and  Turkey  placed 
embargoes  on  the  exportations  of  carpet  wool  but 
this  resulted  in  no  material  embarrassment  to  our 
mills  because  by  far  our  largest  supply  of  this  wool 
is  from  China  and  our  trade  with  that  country  was 
not  disturbed.  Our  difficulties  were  concerned  chiefly 
with  the  better  classes  of  wool,  of  which  we  obtain 


THE  IMPORT  SITUATION  235 

normally  about  60  per  cent  from  the  British  empire, 
and  the  rest  mostly  from  South  America. 

The  war  came  at  an  opportune  time  for  the  woolen 
manufacturers.  The  Underwood-Simmons  tariff  law 
had  placed  raw  wool  on  the  free  list  on  December  1, 
1913,  and  there  were  large  importations  of  foreign 
wool  up  to  the  time  that  the  war  began.  From 
December  1,  1913,  to  August  1,  1914,  we  received 
35,000,000  pounds  more  of  raw  wool  than  in  the  same 
period  of  the  preceding  year.  At  the  opening  of 
the  war  there  was  a  considerable  supply  of  wool 
afloat  for  this  country  or  contracted  to  be  delivered 
here,  so  until  the  end  of  October  the  wool  receipts 
continued  in  large  volume. 

But  with  the  opening  of  the  wool  auction  sales  In 
London,  early  in  October,  Great  Britain  announced 
an  embargo  on  wool  exports  from  the  United  King- 
dom. The  wool  trade  was  not  alarmed,  assuming 
that  the  imports  from  Australia  and  New  Zealand 
would  not  be  affected.  Anxiety  began  to  be  felt, 
however,  when  despatches  from  Washington  early  in 
November  announced  that  Australia  and  New  Zea- 
land had  imposed  embargoes  on  wool  exports ;  and  it 
was  asserted  that  England  had  forbidden  British 
vessels  to  carry  South  American  wool  to  the  United 
States.  As  a  result  of  these  factors,  our  receipts  of 
wool  declined  in  November  and  fell  to  a  very  low 
level  in  December.  They  did  not  reach  their  normal 
volume  again  until  March,  after  the  February  agree- 
ment of  our  importers  with  the  British  Government. 
That  we  were  allowed  to  get  as  much  wool  as  we  did 


236  ECONOMIC  ASPECTS  OF  THE  WAR 

in  those  winter  months  was  due  partly  to  the  clamor 
of  the  Australians  at  being  deprived  of  their  cus- 
tomary American  market.  Some  shipments  of  Aus- 
tralian merino  wool  moved  forward  under  temporary 
licenses  granted  American  firms;  but  nobody  knew 
how  long  the  system  would  last,  or  what  there  might 
be  in  the  future. 

The  difficulty  in  the  negotiations  between  the 
American  woolen  manufacturers  and  the  British 
Government  arose  from  the  nature  of  the  required 
guaranty,  namely,  that  the  wool  would  not  reach 
Germany  in  any  way  or  form.  Americans  consid- 
ered it  impracticable  and  unfair  to  be  asked  to  put 
up  a  bond  supporting  such  a  guarantee,  because  of 
the  numerous  stages  and  the  many  hands  through 
which  the  wool  must  pass  in  its  progress  to  the 
ultimate  user.  Meantime,  the  woolen  manufacturers 
complained  that  the  Allies  were  overwhelming  them 
with  war  orders  and  were  not  letting  enough  wool 
supplies  come  forward  to  make  the  filling  of  those 
orders  possible. 

The  Textile  Alliance  comprises  the  four  leading 
textile  associations  in  America  and  was  originally 
formed  to  correct  certain  abuses  connected  with  the 
purchase  of  mill  supplies.  It  was  through  this 
organization  that  the  plan  was  eventually  worked 
out  which  allowed  wool  to  come  forward. 

Under  this  plan  a  license  to  receive  wool  in  Amer- 
ica could  be  had  by  an  American  only  after  approval 
of  the  purchaser  by  the  Textile  Alliance,  acting 
through  its  president,  A.  M.  Patterson.     Theoreti- 


THE  IMPORT  SITUATION  237 

cally,  it  was  possible  to  apply  to  London  direct  for  a 
license,  but  the  British  Government  let  it  be  under- 
stood with  quite  sufficient  distinctness  that  -it  would 
grant  no  license  not  approved  by  the  Alliance. 

The  plan  required  that  a  separate  application 
must  be  made  for  each  shipment.  The  application 
was  to  be  forwarded  by  Mr.  Patterson  to  the  British 
authorities.  If  the  wool  was  to  be  shipped  to  an 
American,  he  must  sign  a  non-export  guarantee 
before  delivery  could  be  had.  All  imported  wool,  it 
was  provided,  must  be  consigned  to  Mr.  Patterson 
or  to  one  of  a  group  of  banks  approved  by  the  Brit- 
ish Government.  The  banks,  however,  could  release 
the  wool  only  upon  written  word  from  Mr.  Patterson. 

The  Textile  Alliance,  in  explaining  the  plan  to  the 
wool  trade,  stated  that  it  had  assumed  strong  moral 
obligations  towards  the  British  Board  of  Trade,  to 
discourage  by  every  lawful  means  the  export  of  wool, 
tops  or  yarns  from  the  United  States.  If  such 
exportation  occurred  it  would  be  considered  by  Eng- 
land as  prima  facie  evidence  that  the  United  States 
was  supplied  with  more  than  enough  wool  for  its 
own  use,  and  the  imports  would  be  restricted  by  the 
British  Government.  Therefore  all  wool  users  and 
dealers  were  urged  to  refrain  from  such  action.  That 
is,  even  wool  raised  in  Montana  might  not  be  ex- 
ported without  bringing  upon  this  country  a  British 
embargo  on  wool  from  Australasia,  and  possibly 
other  measures  that  would  shut  us  off  from  supplies 
from  South  America  in  British  ships. 

In  addition  to  the  measures  already  reviewed,  the 


238   ECONOMIC  ASPECTS  OF  THE  WAR 

export  of  wool  products  to  Germany  was  prevented, 
and  export  to  adjacent  neutrals  hindered  by  Great 
Britain's  August  4  contraband  lists,  and  the  treat- 
ment which  the  August  20  Order  in  Council  pre- 
scribed for  conditional  contraband.  Blankets  were 
listed  as  absolute  contraband  in  the  August  4*  lists; 
woolen  clothing  was  absolute  when  of  obviously  mili- 
tary nature,  and  otherwise  conditional.  This  policy 
reached  its  full  effectiveness  on  March  11,  when  raw 
wool,  wool  tops  and  noils  and  woolen  and  worsted 
yarns  were  suddenly  made  absolute  contraband. 
Again,  in  the  making  of  raw  wool  contraband,  the 
situation  arose  of  Britain  forbidding  us  to  trade 
with  Germany  in  innocent  American  products,  neces- 
sary for  the  German  civilian  population.  Wool  was 
on  the  free  list  of  the  Declaration  of  London. 

The  measures  taken  regarding  wool  and  rubber 
were  paralleled  by  those  regarding  tin.  Tin  comes 
from  England  and  the  Straits  Settlements.  All  of 
it  now  comes  through  London.  After  a  period  of 
complete  embargo,  we  were  allowed  to  import  the 
metal  under  license,  with  a  guarantee  that  tin  and 
its  products  would  be  sold  only  to  our  own  country 
and  the  Allies. 


CHAPTER  XIII 

The  Import  Situation  (Continued) 

Passing  from  commodities  imported  largely  from 
British  possessions,  it  is  of  interest  to  consider  the 
effect  of  the  war  as  to  articles  for  which  our  great 
source  of  supply  is  Germany,  notably  potash  and 
dyestuffs. 

One  of  the  most  important  and  necessary  of  our 
imports  is  potash,  in  which  Germany  has  a  monop- 
oly of  the  world's  supply.  Potash  is  an  essential 
ingredient  of  commercial  fertilizer,  which  becomes 
increasingly  necessary  for  soils  that  have  been 
worked  long  and  have  had  extracted  from  them,  by 
the  growing  crops,  important  chemical  properties. 
Our  use  of  fertilizer  is  naturally  most  extended  in 
the  older  parts  of  the  country,  especially  in  the 
southeastern  cotton  states  where  the  land  has  been 
tilled  without  interruption  for  a  century. 

Commercial  fertilizer  is  compounded  of  phosphoric 
acid,  lime,  nitrogen  and  potash.  All  the  necessary 
elements  are  present  and  readily  available  in  this 
country,  except  potash.  We  import  from  Germany 
1,000,000  tons  annually  of  salts  with  various  per- 
centages of  potash,  containing  about  240,000  tons 
of  the  pure  chemical.  In  normal  times  this  mate- 
rial is  used  principally  in  making  fertilizer,  though 


240  ECONOMIC  ASPECTS  OF  THE  WAR 

it  is  also  employed  in  making  various  chemical 
products,  among  them  gunpowder. 

The  war  came  at  a  bad  time  for  the  fertilizer 
manufacturers  in  this  country.  The  annual  supply 
of  potash  from  the  Gei*man  Syndicate  comes  in  eight 
installments,  running  from  May  to  December.  The 
manufacturers  ask  for  small  installments  during  the 
early  months,  as  they  do  not  begin  to  ship  the  ferti- 
lizer until  the  following  February,  and  large  takings 
in  the  early  months  mean  a  corresponding  tying  up 
of  money  during  the  summer  and  fall.  Hence,  on 
August  1,  1914,  little  had  been  shipped  to  us. 

At  the  outbreak  of  the  war  Germany  declared  an 
embargo  on  the  export  of  muriate  of  potash,  the 
sort  used  in  gunpowder.  This  restriction  lasted  only 
five  or  six  weeks,  but  its  relaxation  was  not  followed 
by  large  imports,  owing  to  difficulties  in  arranging 
payments,  lack  of  transportation,  and  shortage  of 
labor  at  the  German  mines. 

Potash  comes  from  the  Potash  Syndicate.  The 
contracts  under  which  our  manufacturers  had  been 
supplied  contained  a  war  clause,  and  so  had  become 
invalid. 

The  Syndicate  offered,  however,  to  continue  ship- 
ping at  contract  prices  if  the  Americans  would 
carry  part  of  the  higher  cost  of  delivering  potash 
in  America.  The  higher  cost  consisted  of  a  larger 
inland  freight  rate — from  the  mines  to  Rotterdam, 
since  the  German  ports  were  closed — a  higher  ocean 
rate  and  war  risk  insurance.  The  Syndicate  offered 
to  carry  the  higher  ocean  rate,  if  the  Americans  paid 


THE  IMPORT  SITUATION  241 

the  higher  inland  rate  and  assumed  the  war  risk 
insurance.  The  effect  was  to  make  potash  cost  us 
only  $4  per  ton  more  than  before;  which  meant 
for  muriate,  for  example,  a  price  of  $37.50,  instead 
of  $33.50  per  ton  delivered. 

Under  these  conditions  potash  was  brought  to 
this  country,  subject  only  to  the  limitation  imposed 
by  scarcity  of  ocean  tonnage,  until  at  the  end  of 
January  Germany  forbade  its  further  export.  Yet 
it  had  never  moved  freely.  Only  in  January  and 
February  did  our  receipts  equal  as  much  as  one*- 
quarter  of  the  corresponding  receipts  in  the  pre- 
vious year.  In  October,  because  the  German  rail- 
roads had  been  largely  used  for  military  purposes  in 
August  and  September,  we  received  only  1,800  tons 
of  potash  compared  with  92,000  tons  in  October, 
1913. 

The  German  Government  ostensibly  looked  with 
increasing  concern  upon  the  amount  of  muriate  of 
potash  being  used  in  this  country  for  exportation 
to  England  as  pure  gunpowder,  or  as  gunpowder  in 
ammunition ;  and  therefore,  on  January  29,  declared 
an  absolute  embargo  on  the  export  of  all  potash 
salts. 

The  British  blockade  action  on  March  1  showed 
that  England  was  prepared  to  stop  potash  or  any- 
thing else  from  Germany.  Against  our  receiving 
further  shipments  there  was  apparently  a  double 
bar. 

It  so  happened,  however,  that  at  the  beginning  of 
the  war  there  were  three  cargoes  of  potash  in  Ham- 


242   ECONOMIC  ASPECTS  OF  THE  WAR 

burg:  two  in  ships  of  British  registry,  one  in  a 
German  ship.  With  the  outbreak  of  the  war  these 
vessels  were  tied  up  in  port.  The  German  boat  could 
not  venture  out  for  fear  of  capture;  the  English 
boats  were  detained  by  the  Hamburg  authorities. 
These  cargoes  had  been  bought  before  the  beginning 
of  the  war.  In  March,  after  the  British  Order  in 
Council,  potash  in  this  country  was  very  scarce;  so 
the  users  urged  the  State  Department  to  obtain  from 
Britain  permission  for  these  cargoes  to  be  barged 
from  Hamburg  to  Rotterdam  and  there  put  on  ships 
for  America.  It  was  explained  to  London  that  these 
goods,  like  other  imports  allowed  to  pass  in  March, 
had  been  bought  before  the  Order  in  Council  went 
into  effect. 

In  April,  after  long  negotiations,  Great  Britain's 
permission  was  obtained.  It  was  agreed  that  potash 
on  its  way  to  Rotterdam  and  America  should  not  be 
molested.  In  America,  provision  was  made  for  super- 
vising the  distribution  of  this  potash  by  a  govern- 
ment official,  to  assure  the  German  authorities  that  it 
would  reach  only  fertilizer  factories  and  chemical 
manufacturers,  who  would  put  it  to  other  use  than 
the  making  of  explosives. 

Though  apparently  suspicious  as  to  the  possi- 
bility of  keeping  muriate  away  from  American 
powder  manufacturers,  who  were  willing  to  pay  high 
prices  for  it,  Germany  agreed  to  let  the  potash  go 
to  Rotterdam  and  be  exported  thence,  on  condition 
that  we  would  send  three  American  ships,  loaded 
with  cotton,  to  take  it  away.     This  our  government 


THE  IMPORT  SITUATION  243 

declared  itself  unable  to  do,  in  view  of  conflict  with 
the  British  blockade  Order. 

The  result  was  that  the  potash  was  still  withheld. 
Because  we  would  not  send  Germany  the  things  she 
wanted,  that  country  in  effect  set  out  to  deny  us  the 
things  we  wanted.  She  apparently  was  looking  for 
a  pressure  which  would  make  us  feel  the  inconven- 
ience as  keenly  as  we  felt  the  illegality  of  the  British 
blockade.  The  withholding  of  potash  as  a  measure 
of  pressure  against  us  was  no  doubt  the  real  reason 
for  the  January  29  embargo,  rather  than  any  hope 
of  crippling  our  exports  of  explosives  by  that  action. 
Potash  is  not  used  for  smokeless  powder. 

As  a  result  of  these  conditions  the  use  of  fertilizer 
in  this  country  for  the  agricultural  season  of  1915 
was  greatly  curtailed.  This  was  especially  true  of 
the  cotton  states,  where  a  reduction  of  40  to  50 
per  cent  was  reported.  Such  fertilizer  as  was  used 
contained  less  potash  than  usual.  The  effect  on  the 
cotton  crop  may  not  be  noticeably  great  for  the  year 
1915;  but  if  the  war  continues  and  in  1916  no  more 
potash  is  available  than  this  year,  the  results, 
according  to  agricultural  experts,  will  be  very 
marked. 

Apparently  the  resumption  of  our  potash  imports 
is  dependent  upon  the  successful  assertion  of  our 
right  to  ship  our  products  to  Germany.  It  may  be 
an  additional  incentive  for  us  to  start  the  movement 
of  cotton  to  Germany,  if  that  movement  is  the  price 
we  must  pay  for  potash  to  raise  more  cotton. 

We  Americans  are  fond  of  saying  that  we  are  a 


244   ECONOMIC  ASPECTS  OF  THE  WAR 

self-sufficient  nation,  independent  of  the  world.  We 
raise  everything  we  need.  No  one  can  hurt  us,  we 
say,  for  we  are  a  complete  world  in  ourselves.  The 
war  will  serve  to  awaken  us  from  this  self-hypnotism. 
Of  some  products,  such  as  cotton,  we  raise  a  great 
deal  more  than  we  need,  and  a  war  that  cuts  off  our 
exports  brings  us  distress.  Of  some  vital  products 
like  potash  we  produce  less  than  we  need,  or  none  at 
all;  and  war  cuts  us  off  from  the  necessary  raw 
material.  We  suffer  as  to  potash  because  German 
mines  have  a  monopoly  of  the  supply.  We  suffer 
as  to  dyestuffs  because  German  industry  has  created 
a  practical  monopoly  of  their  production. 

In  olden  days  our  textile  manufacturers  did  their 
coloring  with  vegetable  or  animal  products  from 
such  sources  as  logwood  or  the  cochineal  bug.  These 
natural  dyes  have  been  displaced  by  synthetic  dyes 
which  are  derived  from  coal-tar.  We  have  no  longer 
the  apparatus  and  trained  men  for  making  and 
applying  the  old  natural  dyes.  And  the  development 
of  the  synthetic  dyes,  their  manufacture  on  a  vast 
scale  and  the  supplying  of  them  to  the  rest  of 
the  world,  have  been  an  achievement  of  industrial 
Germany. 

The  manufacture  of  coal-tar  dyes  Is  complex.  By 
distilling  coal-tar  ten  products  called  crudes  are 
produced.  By  treating  these  crudes  with  non-coal- 
tar  products,  like  acid  and  gases,  300  intermediates 
are  produced.  These  intermediates  are  assembled  or 
combined  to  form,  all  told,  some  900  finished  dyes,  of 
which  a  considerable  proportion  are  in  use  in  the 


THE  IMPORT  SITUATION  245 

United  States.  It  is  as  if  ten  fibers  were  used  to 
make  300  yarns,  these  in  turn  being  woven  into  900 
patterns. 

There  are  several  reasons  why  no  dyestuff  indus- 
try has  developed  in  America.  One  difficulty  is  in 
the  production  of  intermediates.  The  making  of 
some  of  these  is  a  process  kept  secret  or  patented  by 
the  Germans.  In  the  case  of  others,  by-products  are 
developed  for  which  the  Germans  alone  have  found 
a  Use  and  a  market.  The  German  industry  is  largely 
in  the  hands  of  four  great  concerns  which  produce 
all  of  the  intermediates  and  finished  dyes,  and  use  all 
of  the  by-products.  To  compete  with  such  indus- 
tries, it  would  be  necessary  to  operate  upon  the  same 
scale.  Some  of  the  intermediates  and  finished  dyes 
could  not  be  made  in  this  country  until  secret  pro- 
cesses were  discovered  or  until  the  expiration  of  Ger- 
man patents.  We  could  not  operate  with  efficiency 
until  we  had  trained  the  thousands  of  chemists  who 
watch  over  every  division  and  subdivision  of  the  dye- 
making  process  in  Germany. 

While  the  shortage  of  dyestuffs  has  given  some 
stimulus  to  the  industry  in  this  country,  it  is  a  peril- 
ous business  to  embark  upon  the  manufacture  of 
dyes  for  the  war  period  alone,  only  to  encounter  dis- 
astrous competition  with  the  lower-cost  German 
product  upon  the  return  of  peace.  The  develop- 
ment of  a  real  dyestuff  industry  in  America  would 
be  a  slow  matter  at  best,  but  even  much  of  a  begin- 
ning is  dependent  largely  upon  a  heavy  protective 
duty  and  perhaps  a  change  in  our  laws  to  prevent 


246   ECONOMIC  ASPECTS  OF  THE  WAR 

foreigners  from  dumping  their  products  here  at 
famine  prices  after  the  war.  An  increased  protective 
duty  would  be  opposed  by  many  of  the  manufacturers 
who  use  dyestuffs.  It  would  be  unfavorably  received, 
at  present,  by  the  American  public  and  be  out  of  line 
with  the  policy  of  a  Democratic  administration. 

There  are  a  few  dyestuff  plants  in  America,  but 
these  have  been  employed  largely  on  intermediates 
imported  from  Germany.  To  solve  the  problem  of 
war  shortage  they  can  help  but  little.  It  is  vain  to 
say  that  we  have  the  largest  supplies  of  raw  mate- 
rial for  dyes  in  the  world.  It  is  true  that  by  col- 
lecting the  great  quantities  of  coal-tar  which  we 
could  collect  from  our  enormous  coking  industry,  we 
could  produce  more  of  this  material  than  anyone  else. 
But  the  problem  is  to  make  the  intermediates.  It  is 
a  problem  of  processes,  patents,  trained  men,  organi- 
zation and  markets.  To  meet  the  war  situation  there 
is  no  prospect  of  American  substitutes  taking  the 
place  of  German  dyes ;  the  difficulty  that  confronts 
dye  users  must  be  solved  by  regaining  the  German 
supply. 

At  the  outbreak  of  the  war  Germany  put  an 
embargo  on  the  export  of  dyestuffs,  but  in  the  latter 
part  of  August  shipments  were  allowed  to  come 
forward  to  the  United  States  via  Rotterdam.  Be- 
fore the  end  of  September,  however,  German  consu- 
lar agents  here  reported  to  their  home  office  that  we 
were  shipping  dyes  to  England.  This  seems  indeed 
to  have  been  the  case,  though  the  extent  of  such 
direct  re-exports  was   small.     For  the  nine  months 


THE  IMPORT  SITUATION  247 

ending  March  31,  1915,  we  re-exported  to  England 
$54,000  of  dyes  or  dyestufFs,  compared  with  $23,000 
in  the  same  months  of  the  year  before.  More  impor- 
tant than  this,  the  export  of  American  dyes  increased 
from  $244,000  in  1913-1914  to  $538,000  in  1914- 
1915.  These  American  dyes  are  largely  made  from 
imported  German  intermediates,  and  hence  may  be 
looked  upon  mostly  as  re-exports  of  German  dyes  to 
England.  The  figures  given  show  only  the  declared 
movement  of  dyes  from  here  to  England,  and  do  not 
indicate  a  movement  which  is  said  to  have  occurred 
under  false  declaration  of  the  contents  of  shipments. 
Whatever  the  actual  extent  of  the  re-exports,  they 
occurred  in  spite  of  obligation  assumed  by  those  who 
imported  dyes,  not  to  reship  them  to  England. 

Since  England  is  as  dependent  as  we  are  upon  the 
importation  of  German  dyes,  Germany  was  bending 
every  effort  to  keep  her  products  from  England,  and 
so  to  bring  pressure  to  bear  upon  the  dyeing  indus- 
try in  England  and  upon  the  people  employed.  It 
was  the  same  game*  that  England  was  playing  with 
rubber.  After  the  discovery  of  the  movement  of 
dyes  from  here  to  Great  Britain,  already  apparent 
in  September,  the  German  relaxation  of  the  dye 
export  embargo,  when  it  did  come,  was  so  arranged 
that  American  manufacturers  said  it  was  designed  to 
keep  our  industries  in  a  chronic  state  of  "dyestuff 
hunger,"  in  order  to  prevent  us  from  re-exporting. 
Our  embarrassment  was,  in  fact,  probably  due  to 
another  cause.  From  July,  1914,  to  the  end  of 
March,  1915,  we  received  $1,700,000  more  of  dyes 


248   ECONOMIC  ASPECTS  OF  THE  WAR 

and  dyestuffs  than  in  the  same  months  of  the  pre- 
vious year.  To  be  sure,  prices  were  higher,  and  this 
accounted  for  part  of  the  increase  in  the  value  of 
imports.  Yet  the  quantity  imported  was  heavy  and 
apparently  sufficient.  There  was  no  marked  in- 
crease in  the  home  demand  for  dyes.  So,  if,  in  spite 
of  large  imports,  our  industries  were  in  a  "chronic 
state  of  dyestufF  hunger,"  it  was  either  because  the 
supphes  were  held  off  the  market  by  speculators  or 
sent  across  to  England. 

When  negotiations  took  place  with  the  German 
Government,  in  early  October,  1914,  to  induce  Berlin 
to  allow  dyes  to  be  shipped  to  us,  the  German  authori- 
ties insisted  in  return  that  the  dyes  should  be  called 
for  by  American  ships  and  that  these  ships  should 
bring  cotton,  or  something  equally  desired,  to  Ger- 
many. This  demand  had  much  to  do  with  the  start- 
ing of  direct  shipments  of  cotton  to  Germany,  and 
the  use  of  American  boats  therefor.  American  ves- 
sels were  insisted  upon,  because  it  was  assumed  that 
England  would  be  less  likely  to  stop  our  returning 
ships,  and  requisition  their  desirable  d^^estufFs  cargo, 
than  it  would  be  in  the  case  of  ships  carrying  a  less 
imposing  neutral  flag. 

By  a  mistake  which  was  probably  due  to  exces- 
sive timidity,  the  Matanzas,  the  first  American 
steamer  that  went  over  for  dyes  (in  October),  left 
America  in  ballast.  The  German  Government  never- 
theless allowed  the  boat  to  bring  back  a  cargo  of 
dyes.  The  Matanzas  arrived  with  her  first  cargo 
on  November  15,  brought  another  in  January  and 


THE  IMPORT  SITUATION  249 

a  third  in  March.  In  the  meantime,  other  American 
boats  sailed  with  cotton,  some  of  them  direct  to  the 
German  ports.  Dyestuifs  were  sent  to  us  theoreti- 
cally in  an  amount  equal  to  our  average  monthly 
receipts  in  recent  years ;  practically  we  received  more 
than  this  average.  Shipments  came  to  this  country 
in  good  volume  until  the  British  Order  in  Council, 
announced  March  1,  shut  off  all  movement  to  and 
from  Germany.  The  Order  in  Council,  above  all 
else,  stopped  the  movement  of  our  cotton;  and  it 
was  in  return  for  our  cotton  shipments  that  the  dyes 
had  been  sent  to  us. 

On  March  23,  the  steamer  George  E.  Warren 
arrived  in  New  York  with  a  large  cargo  of  dyestuffs 
and  at  about  the  same  time  the  Matanzas  came  with 
her  last  load.  The  skipper  of  the  Warren  said  that 
his  were  the  last  German  dyestuffs  that  would  reach 
us  until  after  the  war,  and  until  the  present  writing 
(August)  his  prediction  has  proved  practically 
true.  American  vessels  which  were  in  Bremen  on 
March  1  loading  dyes  and  other  German  exports, 
received  the  announcement  of  the  British  Order  in 
Council  and  at  once  discharged  what  they  had  loaded 
and  came  back  to  America  empty.  The  American 
steamers  were  afraid  to  sail  with  goods  in  the  face 
of  the  Order  in  Council,  and  the  shippers  were  afraid 
to  ship,  in  view  of  the  danger  of  detention  or  con- 
fiscation of  their  shipments.  Moreover,  the  Germans, 
who  were  doing  everything  possible  to  keep  dyestuffs 
out  of  the  hands  of  Britain,  were  unwilling  to  let 
dyestuffs  be  exported  while  a  British  Order  was  in 


250  ECONOMIC  ASPECTS  OF  THE  WAR 

effect  which  allowed  one  of  His  Majesty's  cruisers  to 
take  into  a  British  port  any  cargo  from  Germany, 
unload  it  there  and  sell  it  in  the  British  market. 

When  the  shipment  of  dyestuffs  ceased,  Americans 
who  were  interested  began  to  appeal  to  Washington. 
Congressman  Herman  Metz  of  New  York  sent  out 
letters  of  inquiry  to  about  1,000  users  of  imported 
dyes:  manufacturers  of  textiles,  leather,  paper,  wall 
paper,  colors  and  printing  inks.  Replies  from  270, 
he  said,  indicated  that  about  250,000  employees 
would  be  affected  by  an  interruption  of  dye  imports. 
He  estimated  that  the  total  number  of  workers 
affected  directly  and  indirectly  would  be  not  under 
2,000,000.  Whether  or  not  such  figures  were  too 
large,  it  was  certain  that  the  threatened  effects  were 
serious.  To  some  extent  it  was  possible  to  substi- 
tute white  goods  for  colored,  but  even  that  meant 
deprivation  of  employment  for  those  ordinarily 
engaged  in  the  coloring  process. 

In  April  it  was  estimated  that  the  supplies  of  dye- 
stuffs  in  the  country  would  take  care  of  our  demands 
until  July  31.  The  pressure  brought  to  bear  at 
Washington  was  strong.  The  British  Government 
perhaps  shunned  the  odium  of  bringing  disaster  upon 
dyestuff  users;  moreover  it  was  not  in  a  good  posi- 
tion to  resist  the  pressure.  England  had  declared 
herself  willing  to  allow  the  export  of  cotton  which 
had  been  contracted  for  before  March  1.  She  was 
now  asked  to  allow  the  importation  from  Germany 
of  dyestuffs  under  similar  terms.  Such  a  concession 
was  suggested  not  only  by  her  own  policy  with  regard 


THE  IMPORT  SITUATION  251 

to  exports,  but  also  by  her  own  interests  as  a  dye- 
stuff  user,  for  experience  had  taught  her  that  she 
could  buy  German  dyes  that  reached  America. 

So  in  the  middle  of  April  a  London  representative 
of  the  Textile  Alliance  obtained  from  England  a  free 
passage  from  Rotterdam  for  two  cargoes  of  dyes, 
consisting  of  goods  said  to  have  been  purchased 
before  March  1.  The  dj^es  were"  to  be  consigned  to 
Secretary  Redfield  of  the  Department  of  Commerce, 
and  by  him  distributed  to  the  members  of  the  Textile 
Alliance.  Many  in  this  country  were  dissatisfied 
with  the  arrangement,  because  the  membership  of  the 
Textile  Alliance  by  no  means  comprises  all  those 
entitled  to  receive  dyes.  The  German  Government 
was  dissatisfied,  and  refused  to  let  the  dyes  come  for- 
ward under  such  an  arrangement.  Berlin  is  said  to 
have  claimed  that  the  dyes  must  move  not  by  the 
grace  of  England,  as  an  extraordinary  shipment,  but 
by  right  of  the  United  States  as  a  part  of  the  free 
commerce  with  Germany  which  was  being  illegally 
obstructed  by  England.  The  dyes  in  question  did 
not  come  forward. 

All  this  meant,  in  plain  English,  that  Germany  was 
determined  to  hold  up  our  supplies  of  dyestuifs  until 
we  re-established  regular  communication  with  her; 
to  keep  from  us  something  that  we  wanted  until,  in 
accordance  with  what  we  claimed  as  our  clear  rights, 
we  should  begin  to  send  our  goods  to  her.  It  was 
believed  that  dyes  were  a  more  powerful  inducement 
to  us  than  potash,  for  we  could  see  in  the  immediate 
future   the   result   of   a   dye   shortage,   whereas   the 


252  ECONOMIC  ASPECTS  OF  THE  WAR 

result  of  a  potash  famine  probably  would  not  be  fully 
felt  until  the  gathering  of  the  1916  crops. 

As  in  the  case  of  potash,  so  with  dyes,  we  cannot 
say  that  Britain  was  directly  responsible  for  the 
threatened  shortage.  Britain  was  willing  to  allow 
us  to  bring  a  small  quantity  of  both  potash  and 
dj^es  through  the  blockade.  But  Britain  must  be 
held  responsible  for  the  sudden  stoppage,  on  March 
1,  of  all  commerce  between  us  and  Germany,  a  com- 
merce of  which  potash  and  dyestuifs  form  an  insepa- 
rable part. 

With  regard  to  the  stoppage  of  imports  from  Ger- 
many other  than  dyes  and  potash,  the  British  Gov- 
ernment bears  the  full  responsibility.  These  imports 
are  normally  very  large  and  serve  a  wide  range  of 
manufacturers,  dealers  and  consumers.  They  include 
hides,  skins  and  furs,  toys,  crockery,  linens,  hosiery, 
laces,  woolen  and  silk  goods  and  gloves. 

It  has  been  noted  above  that  when  the  March  11 
Order  was  promulgated,  all  American  boats  loading 
German  goods  discharged  what  they  had  loaded  and 
came  home.  Moreover,  the  lines  of  steamers  from 
European  neutral  ports  gave  notice  that  hence- 
forth no  goods  of  German  or  Austrian  ownership  or 
origin  would  be  accepted  for  transportation,  and 
discharged  whatever  goods  of  this  nature  they  had 
aboard.  Such  lines  included  the  Holland- American, 
Scandinavian- American,  Swedish- American  and  Nor- 
wegian-American. Their  refusal  to  bring  any  more 
goods  was  natural,  since  their  doing  so  would  expose 
them   to    detention    and   to    whatever    penalty    His 


THE  IMPORT  SITUATION  253 

Majesty's  Government  might  choose  to  impose  for 
disobeying  the  British  Order. 

This  Order  decreed  that  no  vessels  sailing  from  a 
German  port  after  March  1  should  be  allowed  to 
proceed.  All  goods  aboard  must  be  discharged  in  a 
British  or  Allied  port.  If  discharged  in  a  British 
port,  the  goods  were  to  be  turned  over  to  the  marshal 
of  the  prize  court,  and,  if  not  requisitioned  for  the 
use  of  His  Majesty,  they  should  be  detained  or  sold 
under  the  court's  direction,  the  proceeds  of  such  sale 
to  be  dealt  with  as  the  court  deemed  just.  However, 
no  money  should  be  paid  over  by  the  court  before 
the  conclusion  of  peace,  unless  it  were  shown  that  the 
goods  became  neutral  property  before  the  issue  of  the 
Order.  "The  proper  officer  of  the  crown"  was 
authorized  to  modify  this  last  provision,  and  also 
to  authorize  the  release  of  neutral  property  laden  at 
a  German  port. 

The  provisions  of  the  Order  thus  far  cited  affected 
shipments  direct  from  Germany.  Further  provi- 
sions concerned  shipments  of  German  goods  via 
neutrals.  Any  vessel  sailing  after  March  1  from  a 
neutral  European  port  with  goods  of  German 
ownership  or  origin,  was  similarly  to  be  stopped  and 
required  to  discharge  its  cargo.  If  the  goods  were 
not  requisitioned  by  the  British  Government,  they 
might  be  sold  and  the  proceeds  paid  to  the  court. 
The  court,  however,  was  not  to  pay  over  any  of  these 
proceeds  until  after  the  conclusion  of  the  peace, 
unless  it  were  shown  that  the  goods  became  neutral 
property  before  March  1.     The  "proper  officer  of 


254   ECONOMIC  ASPECTS  OF  THE  WAR 

the  crown"  was  empowered  also  in  this  case  to 
release  neutral  property  of  enemy  origin. 

It  is  recalled  that  we  protested  with  vigor  against 
this  tie-up  of  exports  from  Germany  to  this  coun- 
try, in  our  note  of  March  30  directed  against  the 
Order  in  Council.     We  asserted  the 

"rule  sanctioned  by  general  practice,  that  even 
though  a  blockade  should  exist  and  the  doctrine  of 
contraband  as  to  unblockaded  territory  be  rigidly 
enforced,  innocent  shipments  may  be  freely  sent  to 
and  from  the  United  States  through  neutral  coun- 
tries to  belligerent  territory  without  being  subject 
to  the  penalties  of  contraband  traffic  or  breach  of 
blockade,  much  less  to  detention,  requisition,  or 
confiscation." 

That  is,  we  denied  the  right  of  Britain,  even  if  she 
were  maintaining  a  blockade  of  Germany,  to  stop 
the  movement  of  German  traffic  to  us  through 
neutral  countries  adjacent  to  Germany. 

This  communication,  as  shown  elsewhere,  was  not 
answered  until  the  end  of  July.  By  a  series  of 
events,  however,  the  original  decree  was  somewhat 
modified. 

It  Is  recalled  that  the  English  Government  first 
modified  its  Order  by  allowing  us  to  export  through 
neutral  countries,  until  March  31,  cotton  which  we 
had  sold  to  Germany  before  the  first  of  that  month. 
The  cargoes  were  to  be  allowed  to  proceed,  or  else 
bought  at  contract  prices.  It  was  natural  for 
Britain  to  grant  American  importers  a  similar  modi- 
fication of  the  Order  so  far  as  it  aff^ected  westbound 


THE  IMPORT  SITUATION  255 

traffic ;  namely,  to  allow  us  to  receive  goods  wliich  had 
been  paid  for  before  March  1.  The  object  of  the 
westbound  blockade  being  to  deprive  Germany  of 
the  opportunity  to  make  profits  by  exporting,  there 
was  no  insuperable  objection  to  letting  those  exports 
come  forward  for  which  Germany  had  already  been 
paid,  and  whose  detention  would  injure  only  the 
American  buyers. 

This  was  the  nature  of  the  British  modification. 
The  period  during  which  such  goods  might  be 
brought  out  of  Germany  was  twice  extended,  but  the 
principle  was  adhered  to  that  nothing  should  go 
forward  which  had  not  been  paid  for  before  March  1. 

The  efforts  of  Washington  to  help  importers  with- 
out compromising  the  government  on  legal  questions 
resulted  in  a  curious  official  complication.  Although 
our  State  Department  never  recognized  the  legality 
of  the  blockade,  two  of  its  officials,  its  Foreign  Trade 
Advisers,  were  deputized  to  act  as  representatives  of 
American  shippers  in  presenting  to  the  British 
Embassy  at  Washington  proofs  that  their  desired 
imports  from  Germany  were  paid  for  before  March 
1.  It  was  specifically  stated  that  these  Advisers  did 
not  officially  represent  the  government,  and  that 
nothing  they  might  do  could  legally  bind  their  supe- 
riors. Yet  they  were  government  officials,  and  they 
were  acting  with  the  British  Embassy  in  its  method 
of  enforcing  what  their  Department  said  was  an 
illegal  stoppage  of  our  commerce.* 

*The  situation  could  have  been  paralleled  with  regard  to 
our  attitude  towards  Germany.     We  protested  the  sinking  of 


256  ECONOMIC  ASPECTS  OF  THE  WAR 

Earlj  in  April  the  Foreign  Trade  Advisers  re- 
ceived a  note  from  the  British  Embassy  at  Wash- 
ington, containing  the  following: 

"The  British  Embassy  are  authorized  to  state  that 
in  cases  where  a  merchant  vessel  sails  from  a  port 
other  than  a  German  port,  carrying  goods  of  enemy 
origin  for  which  American  importers  claim  to  have 
made  payment  prior  to  March  1,  1915,  proof  that 
such  goods  were  paid  for  before  March  1  may  be 
submitted  for  examination  to  the  Embassy.  If  such 
proofs  are  presented  at  a  sufficiently  early  stage  to 
enable  the  report  thereon  to  be  communicated  in  time 
to  the  British  authorities,  the  result  of  the  investi- 
gations will  be  taken  into  account  and  due  weight 
attached  to  them  in  deciding  whether  the  goods  con- 
cerned should  be  discharged  under  the  provisions  of 
Article  4  of  the  Order  in  Council  of  March  11." 

The  Foreign  Trade  Advisers  sent  to  importers  a 
statement  containing  this  note  and  a  list  of  the 
documents  or  affidavits  which  would  be  considered  as 
evidence  by  the  British  Embassy.*  Proofs  were 
afterward  submitted  as  fast  as  received. 

However,  perhaps  greater  relief  was  afforded  else- 
where. The  British  Government  saw  that  it  must 
not  cut  off  short  all  commerce  from  Germany  to  the 
United  States.     So  it  appointed  the  Holland- Ameri- 

passenger  vessels  with  Americans  aboard.  After  doing  that, 
we  might  have  appointed  two  Foreign  Travel  Advisers, 
attached  to  the  State  Department,  whose  function  would  have 
been  to  inform  prospective  travelers  what  ships  the  German 
Ambassador,  on  behalf  of  his  government,  would  agree  not  to 
torpedo. 

*  For  this  circular  of  the  Foreign  Trade  Advisers,  see 
Appendix,  p.  327. 


THE  IMPORT  SITUATION  257 

can  Line  as  the  route  for  such  traffic  as  might  be 
allowed  to  move.  The  Holland- American  Line  is  the 
one  most  amenable  to  England,  because  of  necessity 
it  runs  through  the  Channel  and  is  at  the  mercy  of 
British  cruisers.  This  line  was  allowed  to  issue  a 
notice  that  upon  certain  conditions  it  would  accept 
German  and  Austrian  goods  after  March  1.  The  con- 
ditions were  that  the  goods  should  be  of  American 
ownership,  and  should  have  been  paid  for  before  the 
first  of  March.  Moreover,  this  fact  had  to  be  sworn 
to  before  an  American  consul  in  Germany,  and  cer- 
tified by  him.  It  was  not  simply  a  question  of  attest- 
ing an  oath;  the  consul  must  certify  the  fact. 

Under  this  arrangement  there  was  no  doubt  that 
American  consuls  gave  their  certification  in  some 
cases  where  nothing  but  ownership  had  changed 
hands  before  March  1;  that  is,  where  an  order  had 
been  given  but  no  payment  had  been  made.  If  the 
British  requirement  had  been  strictly  met,  few  goods 
would  have  come  out  of  Germany  after  the  first  of 
March.  The  very  important  reason  for  this  was  the 
fact  that  imports  are  not  generally  paid  for  before 
they  are  shipped.  In  the  case  of  90  per  cent  of  them 
a  bill  is  drawn  by  the  seller  on  the  buyer,  or  his 
banker,  at  the  time  the  goods  are  shipped.  This 
draft  does  not  become  payable — i.e.,  the  goods  are 
not  paid  for — until  at  least  30  days  later.  One  of 
the  largest  import  firms  in  New  York  had  placed 
heavy  orders  in  Germany,  but  on  March  1  had  only 
ten  cases  of  goods  in  that  country  for  which  it  had 
actually  paid. 


258  ECONOMIC  ASPECTS  OF  THE  WAR 

Probably  because  of  this  freedom  with  which  the 
American  consuls  interpreted  the  circular  of  the 
Holland-American  Line,  the  British  Government 
caused  the  company  to  require  the  certification  of 
the  Netherlands  Oversea  Trust  in  addition  to  that  of 
the  American  consul.  During  May  the  United 
States  Government  notified  its  consuls  that  they  had 
no  authority  to  certify,  but  merely  to  attest  the 
oaths  of  others. 

The  time  limit  within  which  German  goods  could 
be  taken  from  Rotterdam  was  extended  to  June  1, 
and  then  to  June  15.  It  was  definitely  announced 
that  after  June  15,  nothing  more  would  be  certified 
by  the  Netherlands  Oversea  Trust,  and  hence  noth- 
ing more  would  be  accepted  by  the  Holland- American 
Line.  On  July  1  the  Foreign  Trade  Advisers  notified 
our  importers  that  on  June  15  the  British  Govern- 
ment had  ceased  issuing  permits  for  the  importation 
of  German  goods  into  America. 

This  final  announcement,  which  had  cast  its  shadow 
before  it,  stirred  the  New  York  importers  of  general 
merchandise  to  action.  They  met  in  New  York  on 
June  10  and  thence  some  of  them  proceeded  to  Wash- 
ington. They  claimed  that  before  March  1  they  had 
ordered  over  $50,000,000  of  merchandise  for  the  fall 
trade.  German  manufacturers  had  proceeded  with 
these  orders,  and  the  American  buyers  would  have 
to  pay  for  them.*     In  opposition  to  this  view  it  was 

*  Moreover,  these  goods  have  been  sold  to  American  re- 
tailers who  may  take  measures  against  the  Importers  for  failure 
to  deliver. 


THE  IMPORT  SITUATION  259 

asserted  by  the  British  that  ample  time  had  been 
given  to  get  all  legitimate  and  bona  fide  purchases 
out  of  Germany.  In  the  case  of  orders  placed  after 
August  1,  1914,  when  war  began,  ordinary  business 
prudence — the  British  said — must  have  caused  the 
buyers  to  have  in  their  contracts  war  clauses  absolv- 
ing them  from  liability  in  cases  such  as  this. — That 
may  be  doubted.  Nobody  foresaw,  until  shortly 
before  March  1,  an  attempt  to  blockade  even  Ger- 
man ports.  A  policy  that  forbade  German  shipments 
through  neutral  ports  was  undreamed  of. 

However  this  may  be,  our  importers  seem  entitled 
to  protection,  whether  they  should  have  foreseen  the 
British  action  or  not.  Their  business  is  an  estab- 
lished trade  in  German  goods,  upon  which  our  manu-- 
facturers  and  our  people  have  become  dependent. 
The  livelihood  of  the  dealers,  the  prosperity  of  manu- 
facturers and  the  comfort  of  many  people  are  con- 
ditioned upon  a  continuance  of  this  trade. 

Further,  in  this  as  in  many  other  matters  arising 
from  the  European  War,  it  is  a  question  of  more  than 
our  right.  If  we  continue  to  trade  with  England  and 
allow  our  trade  with  Germany  to  be  stifled,  we  violate 
an  obligation  of  neutrality.  We  can  no  more  rightly 
refuse  to  buy  from  one  belligerent  and  not  from 
another  than  we  can  rightly  refuse  to  sell  to  one 
belligerent  while  continuing  to  sell  to  another.  Fail- 
ing to  enforce  our  neutral  right  to  trade  with  Ger- 
many is  not  in  strict  terms  a  refusal  to  trade;  yet 
the  principle  is  as  true  today  as  when  clearly  stated 
by  Jeiferson,  that  between  restraining  commerce  our- 


260   ECONOMIC  ASPECTS  OF  THE  WAR 

selves  and  allowing  belligerent  countries  to  restrain 
it  there  is  no  difference. 

On  July  23,  as  we  saw  in  Chapter  VI,  the  British 
answered  with  a  complete  refusal  our  protest  of 
March  30  against  the  blockade.  The  essence  of  its 
contention  was  necessity,  and  the  application  of  the 
inapplicable  Civil  War  cases. 

In  addition  to  this  general  denial  of  our  conten- 
tions, we  received  a  specific  denial.  On  July  15  we 
protested  against  the  seizure  and  continued  deten- 
tion of  the  Belgian  cargo  of  the  American  steamer 
Neches. 

In  our  July  15  note,  the  Issue  was  first  stated. 
The  American  steamer  Neches  with  a  general  cargo 
sailed  from  Rotterdam  for  the  United  States.  She 
was  held  up  at  the  Downs,  taken  to  London  and 
compelled  to  discharge  goods  which  belonged  to 
American  citizens.  The  British  had  justified  the 
seizure  on  the  ground  of  the  March  11  Order  in 
Council,  prohibiting  German  commerce  from  moving 
via  neutral  ports.  (The  Neches  cargo  was  of  Bel- 
gian origin  and  as  Belgium  was  in  German  hands 
this  was  considered  as  German  commerce.) 

Our  note  stated  that  we  considered  the  Neches 
case  an  illustration  of  the  international  invalidity  of 
the  March  11  Order  in  Council.  We  declared  illegal 
the  seizure  of  goods  from  a  neutral  port  merely  be- 
cause they  originated  with  an  enemy  of  Great  Brit- 
ain. Our  Ambassador  was  requested  to  communicate 
to  England  our  desire  that  goods  on  the  Neches,  the 


THE  IMPORT  SITUATION  261 

property  of  American  citizens,  be  expeditiously  re- 
leased and  forwarded  to  destination. 

The  unsatisfactory  British  answer  was  sent  on 
July  31.  With  regard  to  what  Britain  considered  its 
legal  rights,  this  note  referred  us  back  to  the  British 
communication  of  July  23.  Our  attention  was  called 
to  the  inhumanity  of  Germany's  submarine  warfare 
on  merchant  vessels  and  it  was  asserted  that  this 
contrasted  with  the  humane  British  procedure  with 
regard  to  vessels  seized.  It  was  stated  that  Britain 
was  unaware,  except  for  the  published  correspond- 
ence of  America  and  Germany,  to  what  extent  neu- 
trals had  demanded  damages  for  the  unlawful  acts 
of  submarines.  So  long  as  this  German  warfare  con- 
tinued, the  note  went  on,  Britain  could  hardly  be 
expected  to  abandon  her  rights  and  allow  goods  of 
German  origin  to  pass  freely  through  waters 
patrolled  by  British  cruisers. 

However,  it  was  stated  that  in  particular  cases  of 
hardship  in  neutral  countries  England  was  willing 
to  examine  the  facts  with  a  spirit  of  consideration 
for  the  interests  of  neutrals.  England  declared  her- 
self willing  so  to  proceed,  if  the  Neches  were  held 
to  be  such  a  special  case. 

In  preventing  a  stoppage  of  imports  our  govern- 
ment has  an  especial  interest,  because  customs  duties 
furnish  the  largest  single  item  of  our  national  reve- 
nue. In  recent  years  we  have  collected  each  year 
approximately  $700,000,000  in  the  form  of  taxes, 
nearly  one-half  of  this  sum,  about  $300,000,000, 
being   duties   levied   on   imported   goods.      German 


262  ECONOMIC  ASPECTS  OF  THE  WAR 

goods  are,  as  a  rule,  manufactures;  they  are  thus 
subject  to  duty  and  are  sources  of  revenue  to  the 
Federal  Government.  In  the  last  four  years  Ger- 
many has  furnished  10%  per  cent  of  all  of  our 
imports.  She  has  furnished  14%  per  cent  of  our 
imports  subject  to  duty. 

Precisely  how  much  revenue  is  collected  upon  im- 
ports from  Germany  it  is  impossible  to  say.  The 
statistics  of  the  customs  service  are  not  kept  in  such 
a  manner  as  to  show  import  revenues  by  countries, 
nor  can  the  figures  be  so  combined  as  to  produce  this 
result.  However,  it  is  possible  to  get  a  fairly  close 
estimate  of  the  amount  so  collected. 

We  know  our  total  imports  from  Germany,  and 
we  know  the  value  of  our  imports  of  a  certain  num- 
ber of  the  leading  articles  in  this  trade,  thirteen  in 
all,  some  of  them  dutiable  and  some  of  them  free. 
In  the  calendar  years  1912,  1913  and  1914  these 
specified  articles  represented  one-half  of  all  imports 
from  Germany.  The  average  rate  of  duty  applicable 
to  these  goods  was  25  per  cent  in  1912,  and  26  per 
cent  in  1913  and  1914.  It  is  a  fair  assumption  that 
the  average  duty  we  collect  on  all  German  imports  is 
25  per  cent.  Before  the  war  we  were  importing  from 
Germany  at  the  rate  of  $120,000,000  per  year.  A 
25  per  cent  duty  on  this  amount  would  yield  us  an 
annual  revenue  of  $30,000,000.  In  reality  we  prob- 
ably collect  more  than  this.  Germany  sends  us  14% 
per  cent  of  all  the  dutiable  goods  that  we  import.  If 
these  goods  pay  the  average  rate  of  duty  they  would 
yield  14%  per  cent  of  the  total  we  collect.     That 


THE  IMPORT  SITUATION  263 

total  is  over  $300,000,000  per  year.  So  the  Ger- 
man imports  would  contribute  over  $45,000,000. 
The  true  amount  lies  somewhere  between  the  esti- 
mates of  $30,000,000  and  $45,000,000. 

It  may  be  objected  that  imports  from  Germany 
would  in  any  case  have  fallen  off  during  the  war,  and 
that  our  revenues  from  these  imports  would  inevit- 
ably have  decreased  even  if  Britain  did  not  interfere 
with  our  trade.  In  a  degree,  that  is  true.  In  the 
eight  months  ending  March  1,  when  the  Order  in 
Council  went  into  effect,  we  imported  $76,000,000  of 
goods  from  Germany,  compared  with  $127,000,000 
in  the  same  period  of  the  previous  year.  That  is,  our 
imports  were  60  per  cent  of  normal.  Presumably 
we  were  collecting  that  proportion  of  the  normal 
amount  of  duties  or  at  the  rate  of  $20,000,000  per 
year  on  German  goods. 

But  with  an  absolute  stoppage  of  German  imports, 
our  revenues  will  decline  from  $20,000,000  to  noth- 
ing. And  this  $20,000,000  is  a  sum  whose  prospec- 
tive disappearance  has  concerned  those  in  the  Federal 
Government  who  must  take  care  of  our  revenue.  No 
one  will  be  popular  who  suggests  taxes  to  meet  a 
$20,000,000  deficit,  which  is  the  contribution  England 
demands  that  our  government  should  pay  towards  the 
enforcement  of  a  non-intercourse  policy,  though  that 
policy,  we  officially  contend,  violates  our  rights  and 
our  neutrality. 


CHAPTER  XIV 

The   Practicability    of    Starving   Germany 

A  sentiment  has  existed  among  many  people,  not 
excessively  partisan  in  their  views  as  to  the  general 
merits  of  the  war,  in  favor  of  allowing  England  a 
free  hand  in  the  treatment  of  commerce  for  Germany. 
They  feel  that  a  policy  on  the  part  of  Great  Britain 
which  would  tend  to  end  the  struggle  quickly  by 
bringing  to  bear  upon  Germany  not  only  the  force  of 
heavy  military  odds  but  also  the  force  of  severe  eco- 
nomic pressure  ought,  perhaps,  to  meet  the  approval 
of  neutral  countries,  even  though  these  countries 
might  suffer  in  their  own  material  interests. 

This  point  of  view  is  expressed  in  an  editorial  of 
the  New  York  Journnl  of  Commerce  of  March  2, 
the  day  after  the  British  announced  their  ban  on  our 
trade  with  Germany. 

"If  it  is  in  the  power  of  the  Allies  to  keep  from 
Germany  the  supplies  which  would  enable  it  to  main- 
tain its  hostile  operations  against  them  indefinitely, 
whether  these  supplies  are  intended  for  the  direct 
support  of  armies  or  to  replace  those  taken  for  their 
support  from  such  as  would  otherwise  sustain  the 
civil  population,  that  may  be  the  most  effective  and 
humane  means  of  shortening  the  ruthless  process  of 
slaughter,  desolation  and  misery,  the  destruction  of 


STARVING  GERMANY  265 

all  manner  of  values  and  the  huge  losses  which  neutral 
nations  cannot  escape  sharing. 

"All  can  afford  to  share  in  the  cost  and  the  sacri- 
fice to  secure  this  consummation  as  speedily  and 
effectively  as  possible." 

In  the  discussion  of  Great  Britain's  action  with 
respect  to  cotton,  and  also  as  to  copper,  some  atten- 
tion was  given  to  the  practical  effect  of  the  British 
policy  in  bringing  to  bear  upon  Germany  pressure 
which  might  shorten  the  war.  It  was  seen  that  in 
neither  case  was  there  any  considerable  probability  of 
such  a  result. 

It  is  now  proposed  to  consider  further  the  effi- 
ciency of  England's  "attrition"  measures,  especially 
with  regard  to  foodstuffs.  It  will  be  instructive  to 
note  the  resourcefulness  with  which  Germany  has 
negatived  the  English  policy.  Not  only  is  it  prob- 
able that  Germany  will  "get  through" ;  but  it  is  also 
possible  that,  under  the  English  economic  pressure, 
she  will  develop  permanent  substitutes  for  some  of  the 
products  we  formerly  sent  her. 

The  common  opinion  is  about  as  follows.  Every- 
one knows  that  at  the  time  of  the  Franco-Prussian 
War  Germany  had  a  population  of  40,000,000.  In 
1870  Germany  had  about  as  many  people  as  its 
farms  would  feed.  Everyone  knows  that  this  popula- 
tion has  in  the  meantime  grown  to  nearly  70,000,000. 
Germany's  land  area  has  not  increased.  Therefore, 
there  must  be  about  30,000,000  people  supported  by 
imported  food,  mostly  from  Russia  and  from  oversea. 
If  Germany  were  deprived  of  Russia's  exports,  and  if 


266  ECONOMIC  ASPECTS  OF  THE  WAR 

England  shut  off  the  supplies  from  oversea,  then,  it  is 
reasoned,  a  population  of  70,000,000  would  be  left 
with  food  materials  sufficient  for  less  than  60  per  cent 
of  that  number. 

It  is  generally  assumed  that  the  30,000,000  people 
added  to  the  German  population  since  1870  have  been 
supplied  with  food  brought  into  Germany  by  the 
great  expansion  of  that  country's  trade,  which  has 
advanced  along  with  the  growth  of  population.  This 
is  the  more  easily  believable,  because  it  is  the  explana- 
tion of  the  feeding  of  the  increasing  British  popula- 
tion. Britain,  like  Germany,  is  an  industrial  country 
and  is  the  only  foreign  land  that  we  know  much 
about. 

There  are,  however,  important  differences  in  the 
economic  situation  in  the  two  countries  as  regards 
foreign  trade  and  the  food  supply. 

Britain  was  the  first  "industrial  nation,"  for  the 
great  industrial  inventions  were  made  there.  In 
Britain  the  steam  engine  was  invented  and  first 
applied  to  the  manufacture  of  goods.  The  old  order 
of  production  by  hand  was  here  replaced  by  the  new 
order  of  production  by  machinery.  This  great  ad- 
vance so  cheapened  goods  that,  aided  by  the  low 
transportation  charges  brought  about  by  the  steam- 
ship and  the  steam  railroad,  England  began  to 
supply  with  manufactures  that  part  of  the  world 
which  could  be  reached  by  modern  means  of  communi- 
cation and  which  did  not  erect  a  tariff  wall  high 
enough  to  keep  England's  products  out. 

In  return  for  these  manufactures,  England  took 


STARVING  GERMANY  267 

food  to  supply  her  rapidly  growing  population,  and 
raw  materials — such  as  our  cotton — to  work  up 
into  more  manufactures.  But  the  undeveloped  coun- 
tries could  not  pay  England  with  their  own  products 
for  the  enormous  supplies  she  delivered  to  them.  So 
they  went  into  debt  to  her  and  sent  to  her  stocks  and 
bonds  and  mortgages  for  the  railroad  equipment,  the 
harbor  cranes  and  the  mining  machinery  delivered 
to  them.  For  instance,  it  is  estimated  that  we  owe 
England  three  and  one-half  billion  dollars  or  more; 
that  is  the  sum  of  English  "investments"  in  this 
country. 

The  British  population,  which  grew  from  eleven  to 
forty-four  million  in  the  nineteenth  century,  was 
being  fed  from  abroad.  British  agriculture  posi- 
tively declined,  especially  after  a  policy  of  free  trade 
in  the  fifties  left  it  defenseless  against  the  cheap 
grain  of  the  American  prairies,  the  cattle  of  Texas 
(later  the  Argentine),  the  mutton  of  Australia,  the 
dairy  products  of  the  thrifty  Dutch  and  the  Danes. 
Cheap  transportation  worked  against  the  British 
agriculturists  just  as  it  worked  in  favor  of  the  British 
manufacturers.  Britain  became  a  vast  industrial 
town,  with  the  rest  of  the  world  as  the  surrounding 
country. 

If  Germany  had  followed  the  course  Britain  pur- 
sued she  would  be  as  vulnerable  as  Britain  is  today 
in  her  dependence  on  food  from  across  the  sea. 

The  German  states,  like  other  European  nations, 
had  not  been  able  to  meet  the  competition  of  the 
established  British    industries.      Germany    was    an 


268   ECONOMIC  ASPECTS  OF  THE  WAR 

agricultural  land  when  it  came  into  existence  in  1871. 
It  was  supporting  about  as  large  a  population  as 
its  land  would  maintain,  in  the  agricultural  stage. 
Every  year  a  larger  number  of  natives  had  to  emi- 
grate. German  emigration  to  the  United  States 
reached  110,000  in  1870;  149,000  in  1873.  It  rose 
to  210,000  in  1881,  and  250,000,  the  high-water 
mark,  in  1882.  By  1882  the  influences  were  already 
at  work  by  which  the  exodus  of  Germans  was  to  be 
checked. 

The  annual  loss  during  the  seventies  of  emigrating 
soldiers,  taxpayers  and  laborers  was  regarded  by 
Bismarck  with  grave  misgivings.  He  decided  that 
further  growth  of  Germany  and  the  retention  of  its 
increasing  population  depended  upon  a  development 
of  its  industries.  These  industries  would  employ  the 
increasing  numbers  of  Germans.  The  products  of 
these  industries,  just  as  in  the  case  of  England,  would 
pay  for  the  food  of  those  employed  in  them.  In 
1879,  therefore,  Bismarck  consented  to  the  establish- 
ment of  a  protective  tariff,  to  shield  infant  German 
industries  from  being  overwhelmed  by  British  manu- 
factures. 

It  took  time  for  the  effect  of  this  tariff  to  be  seen. 
The  industries  had  to  grow  up  before  they  could 
compete  with  England  on  international  markets. 
Emigration  was  still  high  during  the  eighties  and 
early  nineties.  Prices  were  low  and  trade  depressed 
everywhere  during  the  period  of  1880-1894.  But  in 
1895  a  recovery  set  in.  The  German  industries  were 
established  and  ready  to  take  advantage  of  the  re- 


STARVING  GERMANY  269 

covery.  In  1895  emigration  to  America  dropped  to 
32,000,  and  it  has  never  since  passed  50,000  in  any 
one  year.  Since  1906  the  total  German  emigration 
to  all  lands  has  not  exceeded  32,000  in  any  year. 

Every  year  this  outward  movement  has  been  more 
than  balanced  by  an  immigration  into  Germany  of 
Poles,  Galicians  and  Italians,  to  work  in  the  indus- 
tries. That  is,  Germany  has  been  able  to  take  care 
of  her  normal  increase  in  population,  and  more.  It 
has  been  the  popular  impression  that  Germany  has 
needed  land  to  care  for  her  teeming  miUions,  and 
that  a  huge  military  establishment  has  stood  ready 
to  seize  more  territory  when  the  least  opportunity 
offered.  The  truth  is  that  she  did  not  need  more 
land  for  her  people  but  more  people  for  her  land. 

The  growth  of  German  export  trade,  a  growth 
larger  than  that  of  the  other  great  nations,  is  indi- 
cated by  the  following  table: 

Exports  of  Leading  Couxtries  1880  and  1912 
1880  1912 

Germany $    718,375,000        $2,421,050,000 

England 1,393,833,000  2,994,805,000 

U.  S.  A 853,638,000  2,204,322,000 

France 890,200,000  1 ,764,780,000 

Germany,  then,  has  proceeded  along  the  same 
paths  as  England  in  developing  herself  into  a  nation 
that  manufactures  for  foreign  countries.  Germany 
differs  from  England,  however,  in  not  having  be- 
come dependent  on  oversea  lands  for  food  supplies. 


270   ECONOMIC  ASPECTS  OF  THE  WAR 

This  would  have  been  the  result  had  Bismarck  fol- 
lowed the  British  policy  of  free  trade  in  food.  Un- 
protected, the  old  high-priced  German  farms  could 
no  more  have  competed  against  American  grain  than 
could  the  English  farms. 

When  in  1879  a  protective  tariff  was  levied 
to  protect  industries,  the  German  manufacturers 
clamored  to  have  foodstuffs  on  the  free  list.  They 
said  that  they  could  not  compete  with  the  English 
manufacturer,  if  the  English  workmen  were  allowed 
to  buy  their  food  in  the  cheapest  markets,  while  the 
German  workmen  could  not.  The  argument  was 
sound,  if  the  sole  object  was  to  become  a  great  indus- 
trial country  like  England,  importing  food  from 
abroad.  Germany's  purely  industrial  development 
would  no  doubt  have  proceeded  more  rapidly  if  no 
duty  had  been  levied  on  grain  and  meat.  But  Ger- 
man agriculture  would  have  declined,  as  did  that  of 
England. 

Bismarck  considered  that  dependence  on  foreign 
food  supply  was  perhaps  a  tolerable  situation  for  a 
country  like  England,  commanding  the  seas,  but  an 
intolerable  one  for  Germany.  Such  a  dependence 
would  put  Germany  at  the  mercy  of  any  nation  with 
a  stronger  navy,  and  Germany  did  not  have  a  navy 
of  any  size,  nor  did  she  then  propose  to  have  one. 

Therefore  the  Chancellor  determined  upon  a  high 
protective  duty  on  meat  and  grain  (particularly 
wheat).  The  duty  kept  German  agriculture  in  the 
field.  The  duty  was  later  increased  with  the  purpose 
of  stimulating  intensive  production  and  keeping  this 


STARVING  GERMANY  271 

production  adequate  to  the  needs  of  the  growing  in- 
dustrial population.  The  attempt  has  been  largely 
successful. 

Protective  tariffs  generally  bring  burdens  in  the 
shape  of  higher  prices  paid  by  the  people  who  live 
under  the  tariffs.  So  in  Germany.  The  German 
laborer  has  paid  more  for  his  meat  and  bread  than 
the  Englishman.  Through  the  payment  of  higher 
prices  for  food,  the  German  laborer  has  been  taxed 
to  supply  the  nation  with  the  economic  equivalent  of 
England's  navy;  namely,  assurance  of  food  supply 
in  the  time  of  war.  But  England's  people,  meantime, 
have  been  taxed  in  other  ways  to  support  their  navy. 

To  be  sure,  England  uses  her  navy  for  other  pur- 
poses than  the  protection  of  food  supply.  But,  on 
the  other  hand,  Germany's  policy  has  attained  a 
desirable  result  that  England  misses;  namely,  the 
retention  of  a  large  population  on  the  land.  This 
has  a  great  and  definite  social  value.  The  country  is 
the  tired  city's  recruiting  ground.  The  possession 
of  very  large  agricultural  contingents  in  Germany's 
armies  is  of  not  inconsiderable  importance  to  her 
in  the  terrible  strain  of  modern  warfare. 

Germany's  production  of  food,  stimulated  by  the 
protective  tariff,  increased  more  rapidly  than  the 
population  it  was  designed  to  support.  In  the 
admiration  expressed  for  Germany's  industrial  de- 
velopment, this  agricultural  success  has  passed  un- 
noticed. In  the  years  1883-1887  the  population  of 
Germany  averaged  46,700,000.  This  grew  to  67,- 
000,000  in  1913,  an  increase  of  a  little  less  than  50 


272  ECONOMIC  ASPECTS  OF  THE  WAR 

per  cent.  An  increase  has  occurred  of  more  than  50 
per  cent  in  the  production  of  every  important  article 
of  food  and  fodder ;  namely,  wheat,  rye,  barley,  pota- 
toes, oats  and  hay.  This  result  was  due  less  to  an 
increase  of  the  acreage  cultivated  than  to  a  more 
intensive  cultivation  and  hence  a  greater  yield  per 
acre. 

In  the  early  eighties  Germany  was  self-supporting 
in  the  matter  of  foods ;  that  is,  everyone  was  fed  with 
the  products  of  German  soil.  Since  then,  products  of 
the  soil  have  increased  faster  than  the  population. 
It  follows  that  if  the  people  were  satisfied  with  the 
same  scale  of  living  as  they  enjoyed  in  the  eighties, 
they  could  still  be  fed  from  German  products.  But 
in  Germany,  as  elsewhere,  in  these  twenty-five  years, 
the  standard  of  living  has  advanced.  People  have 
learned  to  live  better.  They  eat  more.  The  per 
capita  consumption  of  wheat  and  rye  was  40  per 
cent  higher  in  the  years  1902-1906  than  in  the  years 
1886-1890.  Hence  the  growing  food  imports  in 
recent  years. 

The  rye,  wheat  and  flour  imports  for  industrial 
West  Germany  have  been  partly  balanced  by  ex- 
portation to  Scandinavia  of  rye,  wheat,  rye  flour  and 
wheat  flour  from  agricultural  East  Germany.  These 
exports  were  of  course  stopped  when  the  war  broke 
out,  with  a  view  to  conserving  Germany's  home 
supply.  But  there  was  still  a  clear  balance  of  im- 
ports into  Germany,  a  supply  which  was  sure  to  be 
missed,  and  for  which  no  substitute  could  be  found. 

It  must  be  recalled  that   the  war  broke   out   on 


STARVING  GERMANY  273 

August  1,  before  Germany  was  able  to  import  any  of 
the  1914  agricultural  products.  When  Britain  cut 
the  German  oversea  supplies,  the  problem  that  faced 
the  Germans  was  not  one  of  absolute  starvation,  as 
the  British  assumed.  But  it  was  the  difficult  prob- 
lem of  returning  to  a  scale  of  living  that  had  been 
outgrown,  but  which  was  nevertheless  more  than  suffi- 
cient for  actual  physical  needs. 

To  prevent  extortionate  prices  for  the  limited 
supply  of  food  on  hand,  the  German  Government 
early  in  the  war  set  maximum  prices  that  could  be 
charged  for  many  foodstuffs.  The  maximum  prices 
served  their  purpose  well.  They  kept  nourishing 
food  within  reach  of  the  poor  and  of  the  great  masses 
of  those  dependent  on  men  fighting  at  the  front. 

Next,  an  effort  was  made  to  restrict  consumption 
by  appealing  to  the  patriotism  of  the  people.  The 
government  exhorted  the  people  at  home  to  cut  down 
their  use  of  food  and  so  supplement  the  work  of  the 
soldiers  in  the  field. 

Unfortunately  this  was  not  sufficient.  If  there  had 
been  no  maximum  prices  set,  rising  prices  would  have 
automatically  reduced  the  use  of  food  as  it  became 
apparent  that  the  supply  would  not  last  until  the 
next  harvest.  The  government  could  have  controlled 
the  use  of  food  at  any  time  by  repealing  its  maximum 
price  law.  But  this  would  not  have  reduced  the  con- 
sumption equally  on  the  part  of  the  whole  population. 
The  rich  and  the  well-to-do  would  have  bought  as 
much  as  before.  The  reduction  would  have  fallen 
entirely  on  the  poor  and  dependent. 


274   ECONOMIC  ASPECTS  OF  THE  WAR 

One  way  was  left  to  combine  the  benefit  of  maxi- 
mum prices  with  the  necessity  for  making  the  food 
supply  last  until  the  next  harvest, — namely,  for  the 
government  to  take  over  the  supply  and  distribution 
of  the  foods  of  which  a  shortage  was  threatening. 
By  the  end  of  the  year  1914  such  a  shortage  seemed 
possible  in  grain  and  flour.  One  serious  difficulty  had 
arisen  from  the  circumstance  that  the  maximum 
prices  that  could  be  charged  for  grain  were  such  that 
it  paid  the  farmer  to  feed  grain  to  live  stock  rather 
than  sell  it  in  the  market. 

Hence  the  now  famous  Decree  of  the  German 
Federal  Council,  dated  January  25,  1915.  Tliis 
document  was  3,500  words  long,  and  bore  the  title 
"Announcement  concerning  the  Regulation  of  the 
Trade  in  Bread-Grain  and  Flour."  The  essence  of 
the  Decree  was  contained  in  the  first  paragraph, 
which  read : 

"On  and  after  the  first  of  February,  1915,  all 
supplies  within  the  empire  of  wheat,  rye  (oats  and 
barley  were  later  included),  pure  or  mixed  with  other 
grain,  thrashed  and  unthrashed,  are  seized  on  behalf 
of  the  War  Grain  Society,  Limited,  in  Berlin.  In  the 
same  way  all  supplies  of  flour  made  of  wheat,  rye, 
oats  and  barley  will  be  seized  in  behalf  of  the  com- 
munities in  which  they  are  found." 

The  terms  of  the  Decree  did  not  apply  to  supplies 
belonging  to  the  empire,  to  a  state,  to  the  military 
or  naval  authorities  or  to  the  Central  Bureau  which 
provisioned  the  army.     The  Decree  was  designed  to 


STARVING  GERMANY  275 

guard,  essentially,  the  food  of  the  civil  population. 
Moreover,  as  noted  elsewhere,  all  imported  grain  and 
flour  were  excepted. 

The  exceptions  included,  further,  farmers'  seed 
grain  supplies,  and  supplies  for  their  households. 
Mills  and  flour  dealers  were  put  under  regulation  as 
to  the  amount  of  their  sales.  Bakers  were  restricted 
to  the  use  of  three-quarters  of  their  former  amount  of 
flour.     Such  were  the  provisions  of  the  ordinance. 

Later  a  special  Kriegsbrot  (War  Bread)  was  pre- 
scribed for  the  bakers  to  make,  consisting  of  wheat, 
rye  and  potato  flour.  Pure  wheat  bread  was  not  to 
be  baked.  Above  all,  a  reduced  consumption  was 
assured  by  the  bread  card  system.  Each  person  was 
given  every  week  a  commutation  card  calling  for 
bread  to  equal  225  (later  200)  grammes  of  flour  per 
day.  Bread  could  be  obtained  at  bakeries  or  restau- 
rants only  upon  the  presentation  of  the  card,  which 
was  duly  punched.  When  7  x  225  grammes  were 
punched  out  of  the  card,  the  person  could  get  no  more 
bread  until  the  following  week. 

It  was  considered  an  act  of  patriotism  to  go 
through  the  week  with  some  of  the  bread  allowance 
on  the  card  unused.  The  equivalent  of  225  grammes 
per  day  is  150  pounds  of  flour  per  year.  This  is 
well  over  the  amount  that  will  support  life,  but  far 
below  the  amount  that  had  been  used  by  the  German 
population  in  recent  years.  For  example,  in  1902- 
1906  the  average  annual  German  consumption  of 
wheat  and  rye  was  495  pounds  per  person,  over  three 
times  as  much  as  was  allowed  on  the  bread  cards. 


276   ECONOMIC  ASPECTS  OF  THE  WAR 

It  is  well  to  note  this  reduction.  It  is  a  common 
statement  that  Germany  was  never  in  danger  of 
starvation  and  that  she  could  not  possibly  justify 
her  submarine  campaign  as  a  proper  defense  against 
Britain's  plan  to  starve  her.  Today  we  can  make 
light  of  any  plan  of  starving  Germany.  But  on 
February  4,  when  the  submarine  campaign  was 
launched,  starvation  was  by  no  means  impossible. 
The  danger  which  the  German  Government  felt  is 
measured  by  the  drastic  measures  of  self-denial  which 
it  imposed  upon  civilians. 

Von  Loebell,  German  Minister  of  the  Interior  at 
that  time,  wrote  to  Professor  Sering  of  Berlin : 

"We  shall  be  able  to  subsist  during  the  war  only 
if  our  mode  of  life  is  radically  different  from  that  to 
which  we  have  been  accustomed  during  the  long 
period  of  peace.  The  soil  of  Germany  is  fertile  and 
can  maintain  the  population  of  the  country,  but  what 
it  produces  has  not  always  in  the  past  most  appealed 
to  us.  We  need  not  starve,  but  we  must  be  saving 
and  live  simply,  eating  less  wheat  and  white  bread 
and  more  black  bread  and  potatoes  and  utilizing 
what  formerly  was  waste.  We  must  begin  our  saving 
now,  if  it  is  not  too  late.  Every  household  must  be 
placed  on  a  war  footing.  Economy  and  self-denial  at 
home  are  like  readiness  to  face  death  and  courage  at 
the  front." 

A  problem  quite  as  serious  as  that  of  food  for  the 
population  was  that  which  confronted  Germany  with 
regard  to  fodder  for  its  live  stock.  Under  normal 
conditions  fodder  constitutes  a  large  portion  of  the 


STARVING  GERMANY  277 

cargoes  that  fill  ships  going  to  Germany.  The  great 
items  are  barley,  oil-seed  and  oil  cake,  bran  and  corn. 
Altogether,  imports  of  fodder  exceed  exports  by 
more  than  7,500,000  tons.  Evidently,  with  imports 
of  fodder  cut  off,  there  was  necessary  either  a  reduc- 
tion of  live  stock  or  a  diversion  to  the  feeding  of  live 
stock  of  grain  that  ought  to  be  reserved  for  human 
beings. 

Two  measures  were  adopted:  one,  to  reduce  the 
numbers  of  live  stock,  and  the  other,  to  increase  the 
supply  of  home  fodder. 

At  the  opening  of  the  war  there  were  25,000,000 
swine  in  Germany.  With  imports  of  fodder  cut  off, 
farmers  tried  to  keep  their  swine  alive  by  feeding 
them  grain  and  potatoes.  At  the  ruling  maximum 
prices  of  grain,  potatoes  and  meat,  it  paid  the  farmer 
to  turn  grain  and  potatoes  into  pork  before  selHng 
to  the  public.  By  the  end  of  January  the  swine  had 
eaten  most  of  Germany's  oats,  and  a  large  portion 
of  the  potato  crop. 

At  the  same  time  that  the  January  25  Decree  con- 
fiscated supplies  of  grain  and  flour,  there  was  passed 
a  Decree  of  the  Federal  Council  aiming  at  a  reduc- 
tion of  the  number  of  swine.  Towns  of  5,000  and 
over  were  ordered  to  purchase  and  preserve  quanti- 
ties of  pork,  and  for  this  purpose  were  empowered  to 
confiscate  the  swine  supply.  How  many  of  the 
25,000,000  swine  were  thus  appropriated  we  do  not 
know.  In  February  Professor  Schumacher  esti- 
mated that  it  would  have  been  possible  to  save 
alive    18,000,000    of   the   25,000,000    swine,   if   the 


278   ECONOMIC  ASPECTS  OF  THE  WAR 

precautionary  measures  described  had  been  taken 
earlier  in  the  war.  As  it  was,  he  expected  that  9,000,- 
000  would  be  saved. 

In  any  case,  vast  quantities  of  pork  have  been  pre- 
served by  the  German  communities,  and  swine  reduced 
to  the  numbers  which  can  be  conveniently  supported 
without  drawing  upon  the  foods  that  support  men — 
notably  potatoes.  All  potatoes  were  needed  for  men, 
to  help  eke  out  the  supply  of  bread-grain.  Potatoes 
were  withdrawn  from  fodder  use,  both  by  the  drastic 
reduction  of  the  number  of  swine  and  by  a.  raising  of 
the  price  maximum  by  35  marks  per  ton,  which 
occurred  February  15.  This  price  increase  induced 
the  farmer  to  sell  his  potatoes  for  human  use. 

So  much  for  the  means  taken  to  reduce  the  supply 
of  swine.  The  second  problem  of  Germany  was  to 
find  a  way  to  replace  out  of  her  home  supplies  a  large 
amount  of  fodder  formerly  imported,  in  order  to 
support  the  remaining  live  stock.  There  were  two 
possibilities.  First,  a  large  volume  of  potatoes  are 
ordinarily  distilled  into  alcohol,  used  in  beverages 
and  in  the  industries.  Further,  about  400,000  tons 
of  beet  sugar  are  annually  exported,  mostly  to  Eng- 
land. This  exportation,  of  course,  ceased  with  the 
opening  of  the  war. 

A  determined  and  successful  war  has  been  carried 
on  against  alcoholic  beverages  in  Germany;  and  the 
industrial  demand  for  alcohol  has  diminished.  This 
has  set  free  such  a  mass  of  potatoes  that  there  is  now 
a  quantity  available  for  fodder  even  after  all  human 


STARVING  GERMANY  279 

wants  are  met.*  Moreover,  a  method  was  found  of 
making  the  unexportable  raw  sugar  tonnage  avail- 
able for  fodder.  Nitrogen  in  the  form  of  ammonium 
sulphate,  a  by-product  of  the  coking  industry,  has 
been  mixed  with  the  sugar  to  make  a  fodder  with  over 
50  per  cent  of  albumen.  This  discovery  was  the  work 
of  the  Institut  fuer  Gaerungsgewerbe  (Institute  for 
the  Yeast  Industries)  in  Berlin.  It  means  a  substi- 
tute for  the  fodder  albumen  formerly  contained  in 
imported  barley.  A  new  straw  meal  has  made  the 
food  values  in  straw  available  for  live  stock. 

So  successful  have  been  the  German  restrictive 
measures  that  at  the  end  of  May,  1915,  the  price  of 
flour  was  reduced,  and  the  communities  were  stopped 
from  further  slaughtering  and  pickling  their  swine. 
For  the  first  war  year  the  problem  is  solved.  It  is 
now  known  that  several  million  tons  of  grain  and 
fodder  will  be  carried  over  to  the  next  season,  along 
with  the  crops  now  being  harvested.  Any  shortage 
of  grain  in  the  future  will  be  met  by  a  reduction  in 
the  supplies  for  food  animals.  This  means  a  reduc- 
tion in  the  German  meat  consumption  which  is,  how- 
ever, now  far  above  the  physiological  minimum. 

The  best  measure  of  the  success  of  the  German 
policy  of  price  maxima  and  government  distribution 
is  that  at  present  food  prices  in  blockaded  Germany 
are  lower  than  in  unblockaded  England. 

Next  year's  harvest  has  already  been  planned  to 
meet  the  new  conditions.     The  needs  are,  compared 

*  The  German  potato  crop  averages  40,000,000  to  50,000,000 
tons. 


280   ECONOMIC  ASPECTS  OF  THE  WAR 

with  last  year,  more  wheat  and  more  fodder.  The 
easiest  and  most  abundant  crop  of  fodder  that  can  be 
raised  is  potatoes.  Every  effort  is  being  made  to 
attain  these  objects.  Only  60  per  cent  of  the  normal 
area  devoted  to  sugar  beets  is  being  sown  for  beets. 
It  is  estimated  that  this  will  supply  the  home  sugar 
demand.  The  remaining  40  per  cent  of  the  former 
beet  area  was  planted  with  wheat  and  potatoes.  Soil 
has  been  sown  which  under  normal  conditions  was  not 
worth  cultivating.  Moorlands  in  Brandenburg, 
Pomerania,  Schleswig-Holstein,  Hanover  and  West- 
phalia have  been  drained  and  planted.  We  read  of 
potatoes  growing  on  former  tennis  courts  and  front 
lawns. 

The  occupied  regions  of  Belgium,  France  and  (to 
a  lesser  degree)  Poland  have  been  planted,  and  while 
they  will  not  contribute  to  the  feeding  of  the  civilian 
population  of  Germany,  they  will  help  feed  the 
4,000,000  soldiers  quartered  upon  them.  Early  in 
the  war,  large  food  supplies  were  found  in  such 
centers  as  Antwerp,  and  these  were  available  for 
feeding  the  German  army  in  the  West.  The  Russian 
invasions  of  East  Prussia,  which  produced  about 
60,000,000  bushels  of  Germany's  wheat,  were  less 
destructive  to  the  wheat  than  to  the  homes,  farm 
buildings  and  implements  of  the  owners.  The  Russian 
army  sweeps  clean.  However,  great  efforts  have  been 
made  to  rebuild  East  Prussia,  and  certainly  a  large 
part  of  its  normal  harvest  will  be  gathered. 

So  many  farm  laborers  were  drafted  into  the  army 
that  during  the  last  harvest  a  shortage  of  hands 


STARVING  GERMANY  281 

was  feared.  But  volunteer  helpers  nearly  swamped 
the  farmers.  In  addition,  this  year  there  are  nearly 
two  million  prisoners  to  help  gather  the  harvest  and 
most  of  these  prisoners  are  Russians,  farmers  by 
profession.  The  supply  of  farm  horses  will  be  40  per 
cent  less  than  in  peace  time.  This  lack  will  be  met  by 
a  large  use  of  colts,  oxen  and  cows,  and  also  by  an 
increase  in  the  employment  of  motor  plows  using 
benzol  as  fuel. 

Finally,  Germany  in  this  crucial  year  has  been 
helped  through  by  a  smuggling  trade  of  large  pro- 
portions. Probably  the  smaller  part  of  this  trade 
was  in  American  breadstufFs  and  provisions  moving 
into  Germany  via  adj  acent  neutrals.  No  doubt  there 
has  been  a  considerable  volume  of  this  business.  No 
doubt  it  will  continue,  no  matter  how  stringent  the 
"blockade."  Once  goods  are  in  the  free  channels  of 
commerce  in  Scandinavia,  the  sharpest  laws  and  the 
most  industrious  British  supervision  cannot  prevent 
them  from  being  drawn  over  the  borders  into  Ger- 
many by  the  magnet  of  high  prices.  And  there  can 
be  no  scarcity  in  Germany  that  is  not  reflected  in 
attractive  prices  for  imported  food,  which  is  exempted 
from  the  government  grain  monopoly  and  the  govern- 
ment's price  maxima. 

Yet  the  largest  smuggling  trade  has  been  from 
Roumania  and  Russia.  Roumania  is  normally  a 
heavy  exporter  of  grain.  In  the  fall  of  1914,  before 
her  exports  were  marketed,  the  Dardanelles  were 
closed.  Austria  and  Germany  both  had  wheat  defi- 
cits, and  were  paying  high  prices  for  imported  wheat. 


282   ECONOMIC  ASPECTS  OF  THE  WAR 

What  else  could  Roumania  do  with  its  grain  than  sell 
to  the  Teutonic  Alhes?  It  sold  them  so  much  that 
before  the  first  of  1915  the  Roumanian  Government 
put  an  embargo  upon  further  exportation,  and  in 
the  spring  of  1915  that  country  was  even  buying 
wheat  to  carry  its  population  through  to  the  summer 
harvest. 

Roumania,  having  marketed  its  own  grain,  turned 
dealer  for  Russia.  Russia  has  always  been  dependent 
upon  her  exportation  of  grain  to  pay  for  her  imports 
of  other  things  and  the  interest  on  her  enormous 
foreign  debts.  Her  grain  crop,  harv^ested,  found  the 
Dardanelles  closed  by  the  Turks  and  the  Baltic  exit 
held  by  the  Germans.  Exportation  to  western 
Europe  via  Vladivostok  and  the  Suez  Canal  was  out 
of  the  question,  partly  by  reason  of  the  high  freights 
and  partly  because  of  the  deterioration  due  to  trans- 
portation through  the  tropics. 

Moreover,  Russian  grain  cannot  be  indefinitely 
stored,  as  ours  can.  That  country  has  few  grain 
elevators  like  those  of  the  United  States  and  western 
Europe.  Russian  grain  is  usually  sacked  and  stored 
on  the  open  shipping  platform  of  the  country  rail- 
road station,  covered  only  with  a  tarpaulin.  At  best 
it  is  put  into  an  unheated  shed.  There  is  no  capacity 
at  the  Russian  seaboard  for  the  storage  of  any  quan- 
tity of  grain.  The  successful  marketing  of  the 
cereal  depends  upon  an  unhindered  movement  from 
ports  like  Odessa.  Restrict  that  movement,  and  the 
grain  backs  up  on  the  station  platforms  and  in  the 
farmers'  shacks. 


STARVING  GERMANY  283 

The  dealers  In  this  grain  are  mostly  Jews.  They 
have  no  especial  love  for  Russia.  They  had  advanced 
money  to  the  farmers  for  which  the  grain  served  as 
security.  They  could  get  their  money  back  only  by 
selling  the  grain.  The  only  countries  they  could 
reach,  and  which  wanted  to  buy  grain,  were  Germany 
and  Austria. 

Therefore  they  sold  to  Germany  and  Austria,  not 
direct  but  via  Sweden  and  Roumania.  The  early 
Russian  embargo  on  grain  exportation  was  universal, 
but  this  changed  to  an  embargo  on  exports  to 
Russia's  enemies.  The  New  York  Journal  of  Com- 
merce of  February  18  contained  a  despatch  from  St. 
Petersburg,  in  which  the  Russian  Ministry  of  Com- 
merce and  Industry  was  reported  as  believing  that 
quantities  of  foodstuffs  were  reaching  Germany  from 
Russia  through  Finland  and  Sweden.  The  attention 
of  the  Russian  authorities  had  been  called  to  unusual 
shipments  which  had  resulted  In  flooding  Finland  with 
frozen  meat,  flour,  grain,  butter  and  eggs.  An 
inquiry  was  said  to  have  revealed  that  Swedish  com- 
mission merchants,  who  bought  from  the  Finns,  In 
most  cases  represented  houses  In  Hamburg.  The 
extraordinary  demand  for  the  Russian  ruble  In  coin 
or  In  bills — a  demand  existing  In  both  Sweden  and 
Denmark — and  the  high  prices  ofi^ered  for  produce 
In  Finland,  were  considered  clear  signs  of  this  Illegal 
trade. 

The  Russian  Government  Itself  must  have  winked 
at  this  trade.  It  was  the  only  means  of  letting  the 
Jew  dealers  make  money,  so  that  they  would  be  avail- 


284   ECONOMIC  ASPECTS  OF  THE  WAR 

able  for  taxation.  The  February  18  "discovery"  of 
the  Russian  Ministry  of  Commerce  and  Industry  may 
be  attributed  to  pressure  exerted  on  Russia  by  Eng- 
land to  support  the  British  starvation  plan.  There 
is  plenty  of  evidence  that  the  Russian  trade  did  not 
cease  on  February  18.  If  the  Dardanelles  still  hold 
out  when  the  Russian  1915  harvest  is  gathered,  we 
may  expect  to  see  another  flood  of  foodstuffs  into 
Germany,  if  Germany  is  in  the  market.  The  chances 
are  that  the  latter  country  will  have  far  less  use  for 
imported  food  during  the  coming  year. 

With  respect  to  Germany's  measures  for  increas- 
ing agricultural  production,  one  difficulty  has  existed 
of  a  kind  not  yet  mentioned.  This  is  the  loss  of 
foreign  supply  of  fertilizer.  The  large  German  agri- 
cultural production,  on  an  area  only  equal  In  size  to 
the  state  of  Texas,  is  only  possible  by  a  liberal  use 
of  fertilizer.  Commercial  fertilizer  Is  made  from 
potash,  lime,  nitrogen  and  phosphoric  acid.  Ger- 
many has  the  necessary  potash  and  lime.  Nitrate 
has  been  imported  in  the  form  of  Chill  saltpeter,  of 
which  800,000  tons  annually  are  brought  from  South 
America.  Some  nitrogen  has  been  procured  at  home 
from  ammonium  sulphate,  a  by-product  of  coal- 
tar  distillation.  Phosphoric  acid  has  come  from 
abroad  In  the  fonn  of  phosphate  rock.  A  million 
tons  are  annually  Imported :  400,000  from  the  United 
States  and  600,000  from  Algiers  and  Tunis. 

The  oversea  supply  of  nitrate  and  phosphate  was 
cut  with  the  opening  of  the  war.  Fertilizer  could 
not   be    made    without    them.      If    fertilizer    could 


STARVING  GERMANY  285 

not  be  made,  there  was  the  prospect  of  a  decrease  of 
25  per  cent  in  the  production  of  German  agriculture. 
One  of  the  German  triumphs  has  been  in  the  meeting 
of  this  situation. 

The  foreign  phosphate  supply  was  replaced  by 
reclaiming  the  phosphate  waste  in  the  slag  of  iron 
ore  smelted  in  Lorraine  from  the  "minette"  ore.  The 
foreign  nitrate  supply  was  replaced  partly  by  a 
larger  quota  of  ammoniates  from  the  coal-tar  dis- 
tilleries, but  principally^  by  the  extraction  of  nitrogen 
from  the  air.  This  process  had  been  developed — 
largely  by  German  capital — in  Norway,  because 
there  existed  in  Norway  the  cheap  water  power 
which  alone  made  it  commercially  possible  to  pro- 
duce this  artificial  nitrate  in  competition  with  the 
natural  product  of  Chili.  After  the  outbreak  of 
the  war,  five  such  nitrate  factories  were  established 
in  Germany. — So  the  fertilizer  difficulty  has  been  met. 

The  new  supply  of  nitrate  also  solved  the  powder 
question  for  Germany.  Chili  saltpeter  was  cut  off 
by  England's  sea  power,  and  a  nitrate  is  necessary 
for  powder.  In  ignorance  of  this  substitute  Sir  John 
French  in  May  gave  an  interview  to  the  Havas 
Agency  saying  that  the  Germans  were  getting  chary 
of  ammunition  and  not  wasting  shells  as  before 
"because  the  failing  supply  of  nitrates  necessary  for 
high  explosives  is  making  itself  felt  in  Germany." 

So  much  for  the  prospect  of  starving  Germany  in 
the  matter  of  foods.  How  is  it  with  regard  to  the 
necessary  raw  materials  of  industry.^  The  situation 
has  been  considered  at  other  points  with  respect  to 


286  ECONOMIC  ASPECTS  OF  THE  WAR 

cotton,  copper,  rubber  and  wool.  It  was  not  hard  to 
show  that  Germany's  supply  of  each  of  these,  or  of 
substitutes  for  them,  is  such  that  there  is  no  prospect 
of  Britain's  interference  with  the  oversea  supply 
affecting  the  duration  or  outcome  of  the  war. 

This  applies  also  as  to  oil.  Germany  annually 
imports  750,000  tons  of  petroleum,  over  two-thirds 
of  it  from  the  United  States.  In  the  fiscal  year  1914, 
ending  June  30,  we  sold  Germany  $20,000,000  worth 
of  petroleum  or  its  products.  Petroleum  was  made 
absolute  contraband  by  Britain  on  October  29.  There 
is  no  more  flagrant  abuse  of  British  manipulation  of 
the  contraband  list  than  is  afforded  by  petroleum. 
Absolute  contraband  means  articles  so  suited  for  war- 
like use  that  their  destination  for  the  military  must  be 
assumed.  Such  articles  are  guns  and  powder.  But 
petroleum  is  used  primarily  for  light,  and,  moreover, 
used  by  the  poorer  classes.  The  next  largest  use  of 
it  is  in  the  form  of  gasoline,  for  motors.  Some 
motors  are  mounted  in  automobiles,  and  some  auto- 
mobiles are  used  by  the  military.  Can  petroleum,  by 
any  stretch  of  the  imagination,  be  conceived  of  as 
conforming  to  the  definition  of  absolute  contraband 
of  war;  namely,  obviously  warlike  nature,  use  and 
destination?  In  the  Declaration  of  London  petro- 
leum was  not  even  on  the  conditional  contraband  list. 

As  has  been  the  case  with  much  of  England's  pro- 
cedure in  "starving"  Germany,  so  with  oil.  The 
pressure  has  been  heavier  on  the  United  States  than 
on  Germany.  The  Germans  have  found  a  substitute 
for  the  oil  they  could  no  longer  import  from  us.   The 


STARVING  GERMANY  287 

Americans  thrown  out  of  work  by  an  enforced  de- 
crease in  our  production  and  refining  of  oil  were  less 
able  to  find  substitute  work  in  a  depressed  labor 
market. 

To  a  considerable  extent,  gas  and  electricity  have 
been  used  to  replace  petroleum.  Moreover,  the  Ger- 
mans have  a  substitute  for  gasoline  as  a  motor  fuel 
in  benzol,  a  product  of  the  great  coking  industry 
which  produces  coke  and  coal-tar.  From  the  coal- 
tar  are  distilled  the  various  products  that  are  bases 
for  the  dyestufF  industry,  including  benzol,  which 
also  has  other  uses.  Benzol  is  an  acceptable  substi- 
tute for  gasoline  for  all  motor  purposes,  except  such 
special  uses  as  submarine  and  aeroplane  engines.  For 
these  uses  Germany  will  hardly  starve  for  gasoline. 
The  stock  on  hand  at  the  opening  of  the  war  was 
80,000  tons,  and  in  May,  1915,  the  German  forces 
drove  Russia  out  of  the  great  Galician  oil  fields. 

If  we  stand  aside  much  longer  and  see  Germany 
compelled  to  find  substitutes  for  American  products 
which  Britain — according  to  our  interpretation  of 
international  law — illegally  bars  from  Germany,  it 
is  not  impossible  that  we  may  force  Germany  so  to 
develop  her  substitutes  that  our  old  markets  will  be 
permanently  gone. 

We  should  not  be  pleased,  at  the  end  of  the  war,  to 
find  that  Germany  had  developed  a  benzol  that  was  a 
perfect  substitute  for  gasoline,  and  that  she  had  pipe 
lines  from  Galicia  to  supply  such  gasoline  as  she 
continued  to  buy.  The  phosphate  rock  producers 
would  not  be  happy  if  Thomas  slag  proved  a  per- 


288   ECONOMIC  ASPECTS  OF  THE  WAR 

manent  substitute  for  our  Florida  rock.  The  copper 
miners  would  suffer  if  Germany,  the  largest  user  of 
copper,  found  the  new  soft  steel  suitable  for  many  of 
the  old  uses  of  copper.  Our  farmers  may  not  rejoice 
to  find  that  we  have  aided  in  forcing  Germany  to 
raise  at  home  the  wheat  and  meat  that  we  annually 
sold  her  in  the  past.  May  not  Britain  be  asking  us 
to  drive  German  genius  farther  than  our  interests 
can  follow.? 

Because  of  the  sacrifices  which  Germany  has  laid 
upon  herself,  because  of  the  genius  which  devised 
substitutes  for  what  could  not  be  imported,  and  be- 
cause of  the  skill  with  which  she  has  thrown  her  whole 
industrial  organization  into  the  new  lines  demanded 
by  the  state  of  war,  her  industries  have  worked  on 
with  perhaps  less  disturbance  than  is  apparent  in 
any  other  of  the  fighting  countries.  The  English 
themselves  admit  this.  For  example,  a  writer  in  the 
March  British  Techmical  Journal  of  Engineering 
writes : 

"In  examining  into  the  reasons  why  German  indus- 
try has  not  only  escaped  being  brought  to  a  stand- 
still by  the  war,  but  has  even  worked  on  with  an 
imposing  certainty  without  any  suspicion  of  nervous- 
ness, it  becomes  clear  that  the  most  potent  factor  is 
that  the  German  army  aided  in  carrying  the  war 
into  foreign  countries.  In  addition  to  this,  the  indus- 
trial and  financial  authorities  succeeded  by  wise  meas- 
ures in  establishing  confidence  in  the  power  of  resist- 
ance of  the  German  industrial  organization,  which  in 
its  turn  rested  upon  military  success. 


STARVING  GERMANY  289 

"The  causes  of  the  uniform  continuity  in  German 
industrial    growth,    however,    in    the    last    instance, 
ought  to  be  found  in  the  fact  that  German  develop- 
ment more  than  that  of  any  other  country  has  grown 
systematically  and  shows  no  gaps  of  any  moment  in 
the  manufacturing  process.     Germany  produces  her- 
self all  her  half-finished  goods,  and  she  utihzes  the 
residuary  products   of  her  industrial  processes   for 
the  manufacture  of  valuable  auxihary  commodities, 
with  such  financial  results  that  no  other  industrial 
nation  in  the  world  even  approaches  her  in  this  re- 
spect.    What  these  auxiliary  products  mean  to  Ger- 
many at  the  present  time  is  more  especially  demon- 
strated  by    sulphate    of    ammonium    (nitrate)    and 
benzol  (  fuel) .    The  industrial  expansion  of  Germany, 
although  it  is  much  newer  than  that  of  England,  has 
been  laid  out  on  more  systematic  lines  and  m  such  a 
way  as  to  render  the  country  more  nearly  independ- 
ent of  foreign  aid.     Under  the  difficult  and  strenuous 
conditions  of  war  are  demonstrated  the  extreme  value 
of  system  and  method  and  the  advantages  which  they 
confer  on  a  nation  when  it  is  cut  off  from  countries 
from  which  it  draws  raw  material." 

There  is  no  indication  of  any  industrial  collapse 
in  Germany,  due  to  "economic  pressure."  Unem- 
ployment is  no  greater  than  in  peace  times.  The 
freight  earnings  of  the  state  railways,  the  surest 
measure  of  the  movement  of  business,  are  nearly 
normal.  There  has  been  a  decrease  in  foreign  trade 
with  oversea  countries,  not  with  all  countries.  Adja- 
cent neutrals  are  still  supplied  by  Germany,  some  of 
them  in  higher  degree  than  ever  before.  The  de- 
crease in  foreign  trade  is   compensated,   so   far  as 


290   ECONOMIC  ASPECTS  OF  THE  WAR 

industry  in  general  is  concerned,  by  the  vast  increase 
in  production  for  the  mihtary. 

One  of  England's  mistakes  in  the  war  has  been  the 
willingness  to  sit  still  so  long,  and  to  await  the  silent 
action  of  the  irresistible  "economic  pressure"  which 
the  siren  voice  of  Winston  Churchill  told  them  would 
defeat  Germany  as  certainly  as  winter  struck  the 
leaves  from  the  trees.  Whether  Churchill's  country 
can  now  regain  the  ground  which  Germany  won 
while  England  was  lulled  by  the  siren,  is  the  question 
of  the  outcome  of  the  great  European  War. 

How  the  war  comes  out  is  none  of  a  neutral's 
affairs.  Our  business  as  a  nation  is  to  look  after 
our  own  interests.  If  there  has  been  any  lurking 
belief  that  we  could  serve  those  interests  by  silently 
aiding  Britain's  economic  pressure  and  so  shortening 
the  war  and  the  period  of  our  sacrifices,  knowledge  of 
the  facts  and  the  prospects  must  dissipate  the  illu- 
sion. The  war  will  be  shortened  by  military  victory, 
in  which  we,  as  neutrals,  cannot  be  participants. 

Our  interests  dictate  a  resumption  of  our  peaceful 
trade  with  Germany.  Our  interests  speak  the  same 
language  as  our  rights,  our  duty  to  treat  belliger- 
ents alike  and  our  need  for  maintaining  precedents 
under  which  our  children  can  live. 


CHAPTER  XV 

War  Orders  and  the  Power  They  Place  in  Our 
Hands 

Of  all  our  exports,  the  most  attention  has  fallen 
to  the  export  of  war  munitions.  We  have  heard  a 
great  deal  of  the  moral  and  legal  question  as  to 
whether  a  neutral  should  or  may  send  abroad 
weapons  for  killing  citizens  of  a  nation  with  whom 
we  are  at  peace.  Such  exportation  is  said  to  be  more 
unjustified,  because  circumstances  are  such  that  only 
one  of  the  belligerents,  the  Allies,  can  get  supplies 
from  us,  while  Germany  cannot.  On  this  ground  we 
are  charged  with  being  unneutral  as  well  as  inhuman 
and  false  to  our  professions  of  being  haters  of  war. 
The  question  is  perplexing  millions  of  Americans. 
No  quick  judgment  can  be  passed  upon  it.  Nor  can 
any  one  person  judge  for  another.  Each  decides 
for  himself  according  to  the  combination  which  his 
own  mind  makes  of  such  conflicting  elements  as  hu- 
manity, our  rights,  our  obligations,  our  precedents, 
our  future  and  our  material  interests. 

Before  this  war  had  been  many  months  under  way, 
it  became  apparent  that  it  was  to  be  largely  a  matter 
of  ammunition.  It  is  an  artillery  war.  Under  the 
hail  of  German  shells  the  fall  of  Liege,  Namur,  Ant- 
werp and  Maubeuge  was  a  matter  of  days.     Then 


292   ECONOMIC  ASPECTS  OF  THE  WAR 

Von  Kluck  was  stopped  in  his  rush  for  Paris  partly 
because  of  a  lack  of  ammunition.  All  winter  the 
armies  lay  facing  each  other,  inactive  except  for 
sporadic  attacks,  while  Krupp,  Skoda,  Vickers, 
Schneider,  the  Bethlehem  Steel  Company  and  the 
Japanese  arms  and  ordnance  works  were  rushing 
through  their  orders  to  make  ready  for  the  spring 
campaign.  Kitchener's  remark  that  he  did  not  know 
when  the  war  would  end,  but  that  it  would  begin  in 
May,  was  typical  for  all  the  contestants.  They  were 
waiting  less  for  the  firm  dry  ground  of  May  than 
for  the  spring  crop  of  shells. 

The  May  days  were  battles  of  artillery.  It  was 
the  terrible  bombardment  of  British  guns  that  cleared 
the  way  for  the  advance  at  Neuve  Chapelle.  It  was 
heavy  German  guns  that  tore  Hill  60  like  a  volcanic 
eruption  when  the  British  tried  to  hold  it.  French 
Seventy-fives  in  May  buried  German  trenches  before 
they  were  captured.  Przemysl  was  "sprayed"  with 
Teutonic  shells  and  the  fortress  which  Russian  in- 
fantry had  besieged  for  months  fell  before  German 
artillery  in  as  many  days.  It  was  lack  of  ammuni- 
tion that  forced  Russia — largely  cut  off  from  foreign 
supplies  by  the  Dardanelles  and  German  control  of 
the  Baltic  and  with  Archangel  long  closed — to  lose 
all  Galicia,  Bukowina  and  Poland  in  the  summer 
months  of  1915. 

Under  these  conditions  It  was  natural  for  the 
Allies,  who  controlled  the  seas  and  who  alone  could 
keep  up  communication  with  us,  early  to  close  con- 
tracts with  our  main  ammunition,  arms  and  ordnance 


WAR  ORDERS  293 

factories.  The  ammunition  people  were  booked  full 
for  a  long  period  ahead.  Some  big  guns  have  been 
ordered,  mostly  from  Bethlehem  Steel,  but  the  Allies' 
factories  were  better  able  to  turn  out  the  guns.  It 
was  shells  they  needed,  particularly  shrapnel.  The 
big  guns  and  small  arms  that  we  exported  have  gone 
primarily  to  Russia,  because  Russia  is  short  on  fac- 
tories for  war  materials,  having  relied  on  the  French 
and  German  makers ;  and  because  Russia  in  her 
Masurian  and  Galician  defeats,  when  whole  armies 
were  captured,  suifered  the  loss  of  vast  quantities  of 
the  tools  of  war. 

Shells  were  the  principal  demand.  Shrapnel 
shells  can  be  made  by  anyone  with  a  lathe  who  can 
get  the  steel  to  work  with.  This  country  has  an 
unhmited  supply  of  steel  and  a  very  large  number  of 
machine  shops  which,  due  to  the  slack  times  in  our 
industrial  situation  at  home,  were  glad  to  get  the 
shell  contracts  that  were  sublet  to  them  by  great 
contractors  for  the  foreign  governments,  like  the 
Canadian  Car  and  Foundry  Company.  There  is  no 
doubt  that  these  shell  orders  have  been  of  consider- 
able financial  aid  to  great  industries  like  those  wliich 
manufacture  electrical  supplies,  to  the  railroad 
equipment  companies  which  at  the  beginning  of  the 
war  noted  the  disappearance  of  incipient  railroad 
orders,  and  to  many  a  small  machine  shop  through- 
out the  land. 

Before  the  end  of  1914!  a  very  large  number  of  our 
industrial  concerns  were  interested,  directly  or  in- 
directly, in  manufacturing  implements  of  war.     We 


294j   economic  aspects  OF  THE  WAR 

have  a  large  population  of  German  or  Austrian  ex- 
traction who  were  outraged  at  the  prospect  of  our 
turning  allies  of  the  Allies ;  and  the  practical  effect 
of  the  situation  was,  they  claimed,  nothing  less  than 
this.  When  Congress  opened  in  the  first  week  of 
December  bills  prohibiting  the  export  of  arms  to 
belligerents  were  introduced  in  both  the  House  and 
the  Senate,  the  bill  of  Senator  Hitchcock  of 
Nebraska  being  the  one  to  which  most  attention  has 
been  paid.  It  never  got  beyond  the  Committee  of 
Foreign  Affairs,  to  which  it  was  referred;  the  same 
fate  befell  Senator  Works'  later  bill  and  also  the 
various  House  measures. 

A  great  many  American  manufacturers  were  un- 
willing to  embark  upon  the  manufacture  of  munitions 
of  war  without  knowing  that  this  was  approved  by 
our  State  Department.  Many  letters  were  sent  the 
Department  on  the  matter  and  on  October  15  it  issued 
a  statement  of  its  position.  It  said  that  a  citizen  of 
the  United  States  could  sell  to  a  belligerent  govern- 
ment or  its  agents  any  article  of  commerce  which  he 
chose.  The  risk  he  ran  was  that  the  goods  he  shipped, 
if  contraband,  would  be  intercepted  and  confiscated, 
if  possible,  by  the  belligerent  against  whom  they 
were  to  be  used.  A  neutral  government  is  not  com- 
pelled by  international  law  to  interfere  with  contra- 
band trade  from  its  territory  to  the  belligerents,  nor 
is  the  President  of  the  United  States  or  any  execu- 
tive department  of  the  government  possessed  of  the 
power  so  to  interfere.     So  the  statement  read. 

Official  complaints  of  the  German  Government  were 


WAR  ORDERS  295 

at  first  directed  not  against  our  exportation  of  arms 
and  ammunition  in  general,  but  against  our  exporta- 
tion of  war  implements  which  were  forbidden  by 
international  law.  On  December  8  Count  BemstorfF 
called  the  attention  of  the  State  Department  to 
alleged  violations  of  international  law  by  the  British 
army.  It  was  stated  that  the  British  army  was  using 
dum-dum  bullets.  It  was  claimed  that  Winchester 
and  the  Union  Metallic  Cartridge  Company  were  en- 
gaged in  supplying  illegal  forms  of  arms  and  ammu- 
nition to  the  Allies.  The  State  Department  was 
asked  to  investigate  these  charges. 

On  January  8  the  State  Department  answered  the 
German  Ambassador.  It  stated  that,  while  it  was 
willing  to  take  into  consideration  such  assertions  as 
were  made  in  the  Ambassador's  note,  with  regard  to 
the  British  use  of  dum-dum  bullets,  it  would  not 
investigate  such  charges  or  make  any  comment  upon 
them.  Regarding  the  charge  that  American  com- 
panies had  been  making  illegal  sorts  of  ammunition, 
the  specific  denial  of  Winchester  and  the  Union  Metal- 
lic Cartridge  Company  was  communicated  to  the 
Ambassador. 

About  the  middle  of  December  it  came  to  the 
knowledge  of  the  administration  that  the  president 
of  the  Bethlehem  Steel  Company,  C.  M.  Schwab,  had 
contracted  to  deliver  twenty  submarines  to  Great 
Britain  during  the  war.  The  submarines  were  to  be 
delivered  to  Britain  in  parts,  which  were  to  be 
assembled  across  the  water.  The  Bethlehem  Steel 
Company    apparently    figured    that    this    measure 


296   ECONOMIC  ASPECTS  OF  THE  WAR 

would  avoid  the  Hague  Convention  prohibition  which 
forbids  neutrals  to  construct  war  vessels  for  a  bel- 
ligerent. The  State  Department  thought  differently 
and  Mr.  Schwab,  it  was  reported,  agreed  to  desist. 

The  other  case  in  which  the  administration  was 
called  upon  to  decide  the  legality  of  the  exportation 
of  war  supplies  was  with  regard  to  hydro-aeroplanes. 

On  January  19  the  German  Ambassador  at  Wash- 
ing wrote  the  Secretary  of  State  complaining  that 
hydro-aeroplanes  were  being  constructed  in  the 
United  States  and  shipped  to  the  AlHes.  He  stated 
that  hydro-aeroplanes  were  war  vessels  whose  de- 
livery to  belligerent  states  by  neutrals  should  be 
stopped  under  Article  8  of  the  Thirteenth  Conven- 
tion of  the  Second  Hague  Conference  of  October  18, 
1907.  The  answer  of  the  Secretary  of  State  was  a 
nugget  of  gold  in  the  dry  pages  of  diplomatic  corre- 
spondence. 

Its  essential  part  reads: 

"As  to  the  assertion  of  the  character  of  hydro- 
aeroplanes, I  submit  the  following  comments:  The 
fact  that  a  hydro-aeroplane  is  fitted  with  apparatus 
to  rise  from  and  alight  upon  the  sea  does  not,  in  my 
opinion,  give  it  the  character  of  a  vessel  any  more 
than  the  wheels  attached  to  an  aeroplane  fitting  it  to 
rise  from  and  alight  upon  land  give  the  latter  the 
character  of  a  land  vehicle." 

Presumably,  if  conditions  were  reversed  and  the 
British  were  protesting  hydro-aeroplanes  which  were 
being  shipped  to  Germany,  the  ingenious  German 
Ambassador  would   contend  that  the  machines   had 


WAR  ORDERS  297 

asbestos  fittings  on  their  wings  and  hence  were  to  be 
classed  as  fireflies. 

In  January  the  American  Government  had  a  second 
occasion  to  state  its  position  regarding  the  exporta- 
tion of  war  implements  in  general.  On  January  8 
Senator  Stone  of  Missouri  wrote  a  letter  to  the 
Secretary  of  State.  In  this  letter  he  summarized  the 
complaints  that  he  had  received  from  sympathizers 
with  Germany  and  Austria,  regarding  the  manner  in 
which  we  had  been  guarding  our  neutrality  in  the 
war.  Complaint  No.  9  was  that  we  had  exercised 
"no  interference  with  the  sale  to  Great  Britain  and 
her  Allies  of  arms,  ammunition,  horses,  uniforms  and 
other  munitions  of  war,  although  such  sales  pro- 
longed the  war." 

In  the  answer  of  the  Secretary  of  State,  two  weeks 
later,  it  was  stated  that  the  President  of  the  United 
States  had  no  power  to  prevent  the  sale  of  ammuni- 
tion to  the  belhgerents.  It  was  said  that  it  is  not 
the  duty  of  a  neutral  to  restrict  trade  in  munitions  of 
war,  and  such  had  never  been  the  policy  of  this  gov- 
ernment except  in  cases  of  civil  strife  in  neighboring 
American  republics.  Germany  herself,  the  answer 
continued,  had  been  an  enormous  shipper  of  arms  and 
ammunition  to  belligerents ;  for  example,  during  the 
Russo-Japanese  War.  Moreover,  Mr.  Bryan  said, 
on  December  15  the  German  Ambassador  presented 
a  memorandum  of  his  government  specifically  stating 
that  under  international  law  no  exception  can  be 
taken  to  neutral  states  letting  war  material  go  to 
Germany's  enemies.     Finally,  the  answer  read,  these 


298   ECONOMIC  ASPECTS  OF  THE  WAR 

principles  had  been  laid  down  by  the  United  States 
Government  in  the  October  15  proclamation  of  the 
Department  of  State,  entitled  "Neutrality  and  the 
trade  in  contraband." 

The  German  Government,  apparently  encouraged 
by  the  agitation  in  this  country  regarding  the  export 
of  ammunition,  included  a  reference  to  it  in  its  first 
formal  note  to  us:  the  note  of  FebiTiary  16,  answer- 
ing our  protest  regarding  the  German  War  Zone. 
In  this  note,  the  Germans  pointed  out  "very  particu- 
larly and  with  the  greatest  emphasis"  that  a  trade 
in  arms  estimated  at  many  hundred  million  marks 
had  arisen  between  American  manufacturers  and 
Germany's  enemies.  It  was  admitted  that  no  formal 
breach  of  neutrality  could  be  charged  but  both  the 
German  Government  and  the  German  people  felt 
themselves  placed  at  a  great  disadvantage  in  that 
neutrals  achieved  no  success  in  the  assertion  of  their 
legal  right  to  innocent  trade  with  Germany  while 
they  persisted  in  their  contraband  trade  with  Great 
Britain. — The  words  were  less  a  protest  against  our 
export  of  arms  on  principle  than  against  our  export 
of  arms  to  England  when  we  refused  to  insist  upon 
our  right  to  send  food  and  raw  materials  to  Germany. 

This  passage  in  the  note  of  the  German  Govern- 
ment required  no  answer.  The  same  cannot  be  said 
of  an  unusual  communication  from  the  German  Am- 
bassador to  the  State  Department,  dated  April  4,  a 
short  note  enclosing  a  memorandum  of  the  Ambassa- 
dor on  the  subject  of  our  arms  exports. 

The    memorandum    stated    that,    because    of    the 


WAR  ORDERS  299 

British  Orders  in  Council,  neutral  trade  with  Ger- 
many had  been  strangled.  The  Wilhelmina,  the  first 
food  ship  for  Germany,  had  been  held  up  for  two 
months.  Such  a  delay,  the  Ambassador  continued, 
was  equivalent  to  a  denial  of  the  American  right  to 
trade.  The  Imperial  Embassy  must,  therefore, 
assume  that  the  United  States  Government  acquiesced 
in  the  violations  of  international  law  by  Great 
Britam.  It  was  claimed  that  all  previous  policies 
of  shipping  arms  to  neutrals  were  inapplicable  in  this 
war.  The  United  States  was  said  to  be  the  only 
neutral  nation  furnishing  war  material  to  belligerents 
and  an  entirely  new  industry  was  being  created  in 
America  for  this  purpose.  It  was  pointed  out  that 
the  industry  was  delivering  goods  only  to  the  enemies 
of  Germany.  The  least  that  America  could  do,  the 
Ambassador  said,  was  to  utilize  its  supplying  of  arms 
to  England  for  the  purpose  of  protecting  its  legiti- 
mate trade  with  Germany,  especially  in  foodstuffs. 

Moreover,  the  memorandum  went  on,  for  the 
United  States  to  put  an  embargo  on  the  export  of 
arms  to  belligerents  in  Europe  would  be  similar  to 
President  Wilson's  reason  for  putting  an  embargo 
on  the  exportation  of  arms  in  Mexico;  namely,  in 
President  Wilson's  words : 

"Because  Carranza  had  no  ports,  while  Huerta  had 
them  and  was  able  to  import  these  materials,  it  was 
our  duty  as  a  nation  to  treat  Carranza  and  Huerta 
upon  an  equality  if  we  wished  to  observe  the  true 
spirit  of  neutrality  as  compared  with  mere  paper 
neutrahty." 


300   ECONOMIC  ASPECTS  OF  THE  WAR 

The  German  Ambassador  then  asserted  that  this 
principle,  if  applied  in  the  present  case,  would  lead  to 
an  embargo  on  the  exportation  of  arms. 

On  April  21  Mr.  Bryan  sent  to  the  German  Am- 
bassador an  answer  which  the  President  of  the  United 
States  had  written.  It  was  a  proper  answer  to  the 
memorandum  of  Count  von  Bcrnstorff .  It  suggested 
that  the  relations  between  the  United  States  and 
England  were  not  a  proper  subject  of  discussion  for 
the  German  Ambassador.  It  was  assumed  that  the 
Ambassador  did  not  intend  the  clear  implication  in 
his  note  that  the  United  States  had  not  in  good  faith 
been  performing  its  duties  as  a  neutral.  As  a  matter 
of  fact,  the  answer  continued,  the  United  States  had 
acquiesced  in  no  violation  of  its  neutral  rights.  It 
was  shown  that  this  was  evidenced  by  our  notes  of 
protest  to  England.  Our  impartiality,  said  the 
President,  was  e\ddent  by  our  suggestion  to  Great 
Britain  and  Germany  that  they  should  return  to  the 
fold  of  international  law.  It  was  denied  that  the 
United  States  Government  had  the  choice  of  stopping 
the  sale  and  exportation  of  arms  by  its  citizens.  It 
was  affirmed  that  under  international  law,  if  a  coun- 
try is  to  maintain  its  neutrality,  it  may  not  during 
the  progress  of  the  war  alter  its  own  rules  of  neutral- 
ity. The  President  said  that  the  placing  of  an 
embargo  on  the  trade  in  arms  at  the  present  time 
would  be  a  direct  violation  of  our  neutrality. 

In  July,  1915,  the  Austrian  Government  formally 
protested  our  ammunition  exports.  An  answer  was 
sent  Austria  early  in  August,  similar  to  the  answer 


WAR  ORDERS  301 

sent  Count  von  Bemstorff.  The  Germans  alleged 
the  presence  of  ammunition  on  the  Lusitania  as  their 
justification  for  torpedoing  her.  The  crux  of  the 
present  diplomatic  correspondence  with  Germany  is 
the  question  whether  passengers  can  sail  on  munitions 
ships  and  protect  those  ships  from  sudden  attack  by 
submarines. 

As  a  matter  of  fact,  the  German  Government 
cannot  well  call  upon  either  international  law  or  its 
own  practices  to  contest  our  right  to  ship  arms  to 
belligerent  nations.  It  was  in  the  manufacture  of  war 
materials  delivered  all  over  the  world  to  nations  both 
at  peace  and  at  war  that  Krupp  grew  so  great  that 
it  can  now  supply  most  of  the  needs  of  the  Teutonic 
Allies,  without  outside  aid.  In  Article  7,  Convention 
VII,  and  Article  7,  Convention  XII,  of  the  Hague 
Conference  of  1907  the  right  of  neutral  citizens  to 
ship  arms  to  belligerents  is  stated.  These  provisions 
are  but  the  crystallization  of  immemorial  practice 
among  nations.  Kriege,  German  delegate  to  that 
Hague  Conference,  declared  during  the  proceedings 
that: 

"Neutral  states  are  not  bound  to  forbid  their  sub- 
jects to  engage  in  a  commerce  which  from  the  point 
of  view  of  belligerents  must  be  considered  illicit." 

As  for  our  rights  in  the  matter,  they  are  not  les- 
sened by  the  fact  that  20,000,000  or  more  of  our 
people  are  of  German  and  Austrian  descent,  and  that 
all  of  the  ammunition  is  being  used  against  their 
brothers  in  Europe.    Our  rights  are  not  lessened,  nor 


302   ECONOMIC  ASPECTS  OF  THE  WAR 

our  neutrality  impaired  by  the  circumstance  that 
only  one  of  the  belligerents  can  get  our  supplies.  We 
are  willing  to  sell  to  both ;  but  only  England  can  send 
its  ships  to  take  away  what  it  buys.  England's 
advantage  is  an  incident  of  its  sea  power  and  we  are 
under  no  obligation  to  deprive  it  of  the  advantage 
which  its  sea  power  confers.  We  have  repeatedly  in 
the  past  refused  to  lay  arms  embargoes  at  the  request 
of  belligerents,  who  were  suffering  by  our  war 
exports.  All  our  arms  embargoes  in  the  past  have 
been  at  times  of  national  peril  when  it  was  necessary 
to  conserve  our  supplies  for  the  home  defense;  or 
embargoes  for  the  purpose  of  discouraging  civil 
contentions  in  near-by  Latin  American  countries,  like 
Mexico  and  San  Domingo.  There  is  no  doubt,  the 
rights  and  the  precedents  in  the  matter  are  with  us. 

It  is  rather  upon  grounds  of  humanity  that  many 
American  neutrals  stand  with  the  German  sympa- 
thizers in  this  country  in  the  demand  that  the  arms 
export  cease.  They  cannot  reconcile  our  peace  con- 
ferences and  our  peace  propaganda  with  the  creation 
of  perhaps  the  greatest  arms  industry  the  world  has 
ever  seen.  The  war  might  have  been  over  months  ago 
if  we  had  refused  to  send  ammunition.  To  be  sure,  it 
might  have  been  over  to  the  advantage  of  the  pre- 
pared Germans,  but  is  it  the  business  of  a  neutral  to 
worry  which  side  w^ins  the  war?  Is  not  German  pre- 
paredness an  advantage  which  we  are  in  no  way 
obligated  to  compensate.? 

There  are  some  features  of  this  mushroom  ammuni- 
tion business  that  are  not  attractive.     Hotels  in  New 


WAR  ORDERS  303 

York  swarm  with  brokers  soliciting  orders  from 
foreign  buyers  and  native  producers.  Graft  and 
bribery  necessarily  follow  the  huge  profits  in  these 
contracts.  We  hear  strange  rumors  of  attempts  to 
bribe  government  officials  to  sell  at  exorbitant  prices 
discarded  Krag-Jorgensen  rifles.  It  is  as  if  a  new 
gold  field  were  discovered. 

Some  of  the  up-to-date  methods  of  booming  the 
ammunition  trade  are  less  attractive  than  business- 
like. On  May  6,  1915,  the  Cleveland  Automatic 
Machine  Company  published  a  double  page  adver- 
tisement in  the  American  Machinist.  It  announced 
a  special  lathe  for  making  a  high  explosive  shell.  On 
one  page  was  given  a  cut  of  the  lathe  and  a  cross- 
section  of  the  shell  that  it  made.  On  the  other  page 
is  a  description  of  the  shell's  peculiar  properties. 

"The  material  is  high  in  tensile  strength  and  Very 
Special  and  has  a  tendency  to  fracture  into  small 
pieces  upon  the  explosion  of  the  shell.  The  timmg  of 
the  fuse  for  this  shell  is  similar  to  the  shrapnel  shell, 
but  it  differs  in  that  two  explosive  acids  are  used  to 
explode  the  shell  in  the  large  cavity.  The  combma- 
tion  of  these  two  acids  causes  terrific  explosion,  hav- 
ing more  power  than  anything  of  its  kind  yet  used. 
Fragments  become  coated  with  these  acids  in  explod- 
ing and  wounds  caused  by  them  mean  death  in  ter- 
rible agony  within  four  hours  if  not  attended  to  imme- 
diately. 

"From  what  we  are  able  to  learn  of  conditions  m 
the  trenches,  it  is  not  possible  to  get  medical  assist- 
ance to  anyone  in  time  to  prevent  fatal  results.  It 
is  necessary  immediately  to  cauterize  the  wound  if 
in  the  body  or  head,  or  to  amputate  if  in  the  limbs,  as 


304   ECONOMIC  ASPECTS  OF  THE  WAR 

there  seems  to  be  no  antidote  that  will  counteract  the 
poison. 

"It  can  be  seen  from  this  that  this  shell  is  more 
effective  than  the  regular  shrapnel,  since  the  wounds 
caused  by  shrapnel  balls  and  fragments  in  the  mus- 
cles are  not  as  dangerous,  as  they  have  no  poisonous 
element  making  prompt  attention  necessary." 

It  is  easy  to  be  shocked  by  this  frank  exposition  of 
the  death-dealing  qualities  of  an  American  product. 
But,  after  all,  this  is  a  perfectly  logical  advertise- 
ment. People  are  buying  shells  to  kill ;  therefore  the 
killing  qualities  of  the  shells  are  the  qualities  to  put 
forward.  The  advertisement  is  not  directed  to  the 
general  public,  but  to  the  makers  and  buyers  of 
shells.  Makers,  if  sensible,  will  make  this  type  of 
shell.  Buyers,  if  they  are  wise,  will  insist  upon  this 
Very  Special  product  in  their  specifications. 

Yet,  in  spite  of  all  sentimental  talk  against  the 
export  of  arms,  our  right  to  export  them  cannot  be 
denied  or  even  logically  disputed.  The  pound  of 
flesh  is  ours.  What  is  more,  the  law  of  Venice  not 
only  allows  us  but  compels  us  to  take  it.  In  the  pre- 
amble to  the  1907  Hague  Convention  we  read: 

"The  rules  impartially  adopted  by  the  neutral 
powers  shall  not  be  altered  in  principle  during  the 
course  of  the  war  by  one  of  the  neutrals,  except  in  the 
case  where  experience  shows  the  necessity  for  such 
action  in  order  to  safeguard  the  nation's  rights." 

It  was  this  to  which  the  President  referred  in  his 
note  to  Ambassador  BemstorfF,  explaining  that  to 


WAR  ORDERS  305 

place  an  arms  embargo  in  the  middle  of  the  war 
would  be  a  violation  of  our  neutrality. 

There  are  some  tangible  advantages  that  we  shall 
gain  from  a  continuation  of  the  arms  industry. 
Besides  employing  men  in  the  machine  shops  who 
would  otherwise  be  out  of  work,  we  are  training  a 
large  number  of  mechanics  in  the  rapid  production 
of  the  weapons  of  war.  They  would  be  a  great  asset 
to  us  in  any  war  in  which  we  might  have  to  engage  in 
the  future.  Every  war  of  the  future  will  be  still  more 
an  artillery  war  than  the  present.  As  a  French 
senator  says,  "the  problem  is  to  industrialize  war." 
We  are  industrializing  war.  The  plants  and  the 
men  we  shall  have,  trained  and  ready  at  the  end  of 
this  conflict,  may  be  worth  to  us  fifty  army  corps. 
They  will  be  worth  this  to  us  not  only  in  the  unhappy 
event  of  war,  but  also  a  known  reserve  power  with 
which  to  prevent  war. 

It  is  frequently  said  that  we  must  continue  our 
arms  exports  because  we  cannot  afford  to  aid  in 
establishing  the  principle  that  belligerents  in  war 
time  shall  not  get  arms  from  a  neutral.  Such  a  prin- 
ciple, it  is  said,  would  condemn  to  helplessness  an 
unprepared  nation  attacked  by  a  prepared  aggres- 
sor. The  unprepared  would  be  unable  to  turn  to 
neutrals  for  arms  with  which  to  defend  itself. 

The  argument  is  sound  on  general  lines,  but  it 
has  no  value  when  applied  specifically  to  us.  In  any 
future  war  we  need  fear  only  a  European  or  Asiatic 
aggressor,  separated  from  us  by  a  wide  expanse  of 
ocean.     As  a  possible  supplier  of  arms,  we  can  think 


306   ECONOMIC  ASPECTS  OF  THE  WAR 

only  of  one  of  the  nations  of  western  Europe  or 
Japan.  No  one  else  makes  them.  If  we  in  that  war 
cannot  command  the  seas,  obviously  we  shall  get  no 
arms  or  ammunition.  If  we  in  that  war  command 
the  seas,  we  shall  need  no  aid  in  arming  ourselves. 
No  one  can  reach  us.  Surely  our  former  arms  manu- 
facturing faciUties,  expanded  as  they  have  been  by 
the  European  War,  will  suffice  to  keep  the  navy  and 
the  coast  defenses  suppHed  with  shells.  If  before 
the  war  breaks  out  we  have  not  enough  ammunition 
for  the  regular  army  to  repel  a  surprise  landing,  we 
can  hardly  expect  our  opponent  to  politely  wait  until 
we  go  abroad  and  bring  it  back. 

The  real  arguments  for  continuing  the  manu- 
facture of  arms  for  the  Allies  are  that  it  is  to  our 
present  commercial  and  military  interest  so  to  con- 
tinue, and  that  it  is  our  duty  as  a  neutral  to  do  so. 
England  would  justly  accuse  us  of  unneutrality,  if 
without  reason,  in  the  midst  of  the  war,  we  ceased  the 
shipments  of  arms  which  our  government  had  publicly 
approved  and  upon  which,  relying  on  the  given  word 
of  our  government,  the  Allies  have  become  dependent. 
There  is  no  doubt  that,  whatever  our  personal  senti- 
ments, our  official  actions  up  to  this  point  have  im- 
posed upon  us  some  obligations  in  the  matter. 

Upon  only  one  condition  can  we  withdraw  from  the 
fulfillment  of  those  obligations,  namely, 

"In  the  case  where  experience  shows  the  necessity 
for  such  action  in  order  to  safeguard  a  nation's 
rights." 


WAR  ORDERS  307 

If  we  are  ever  to  learn  by  experience,  we  have 
learned  that  some  action  is  necessary  in  order  to  safe- 
guard our  nation's  rights.  In  two  strong  notes  of 
protest  to  Great  Britain,  we  stated  her  violations  of 
our  rights.  She  prevents  us  from  shipping  non- 
contraband  to  Germany  and  receiving  any  goods 
from  Germany  at  all,  in  defiance  of  our  right  to 
enjoy  such  trade  via  neutral  countries  even  if  Britain 
were  to  estabhsh  that  her  blockade  of  German  ports 
is  effective.  Britain  has  seriously  deranged  our  trade 
with  the  httle  neutral  nations  of  Europe  upon  the 
suspicion  that  some  of  the  trade  may  be  going 
through  to  Germany.  We  have  seen  in  great  detail 
how  deeply  these  violations  of  our  rights  affect  our 
material  interests,  how  little  submission  to  them 
would  accord  with  our  history  or  our  rank  as  a  lead- 
ing neutral,  and  how  dangerous  is  such  submission 
for  our  future  welfare. 

Therefore,  neither  Great  Britain  nor  any  other 
nation  of  the  world  could  blame  us  if  we  laid  an 
embargo  upon  the  exportation  of  arms  for  the  pur- 
pose of  enforcing  our  right  to  trade  unhindered  with 
Germany  and  the  neutral  nations  of  Europe,  in  all 
but  contraband  (as  defined  in  a  reasonable  contra- 
band hst)  with  German  destination.  Our  rights  and 
the  rights  of  neutral  nations  are  that  international 
law  be  observed,  international  law  as  codified  and 
recognized  by  civilized  people  in  the  Declaration  of 
London.  Now,  in  the  midst  of  the  conflict,  there  is 
no  time  to  frame  a  new  code. 

The  Allies  have  placed  with  us  somewhere  between 


308   ECONOMIC  ASPECTS  OF  THE  WAR 

$500,000,000  and  $1,000,000,000  of  arms  and  equip- 
ment orders.  That  is  the  precise  measure  of  the 
power  we  have  over  them.  If  the  United  States  had 
set  out  in  October  to  secure  a  means  to  force  belliger- 
ents to  return  to  the  realm  of  international  law,  it 
could  not  have  proceeded  more  wisely  than  to  publish 
its  October  15  proclamation  assuring  this  country 
and  others  of  the  legitimacy  of  our  arms  trade. 

There  need  be  no  formal  session  of  Congress  to 
declare  an  arms  embargo.  The  State  Department 
need  only  intimate  that  the  administration  is  pre- 
pared to  call  such  a  session,  and  the  result  will  be 
attained.  A  word  to  the  wise,  from  the  wise  and  the 
powerful,  is  sufficient. 

Should  the  impossible  happen  and  should  it  be 
necessary  to  declare  an  arms  embargo,  the  country 
would  by  no  means  be  plunged  into  ruin.  England 
could  not  fight  us ;  that  would  mean  to  starve  herself. 
In  bringing  our  own  armament  up  to  date,  our  gov- 
ernment could  afford  to  employ  the  country's  arms 
capacity  whose  contracts  with,  the  Allies  would  be 
broken. 

That  is  more  than  impossible.  England  would 
know  that  an  arms  embargo  might  be  followed  by  a 
food  embargo,  if  necessary  to  attain  our  rights. 
These  rights  are  so  incontestable  and  this  means  of 
attaining  them  is  so  in  accord  with  even  the  letter  of 
international  law,  that  a  country  which  has  pawned 
with  us  its  military  future  would  not  think  of  losing 
so  precious  a  pledge. 

In  every  note  that  Germany  has  written  she  has 


WAR  ORDERS  309 

emphasized  that  the  submarine  campaign  is  a  retalia- 
tion for  the  unlawful  British  measures  in  holding  up 
food  and  raw  materials  for  Germany.  When  both 
belligerents  are  breaking  the  law  and  each  is  claim- 
ing the  acts  of  the  other  as  justification,  the  pressure 
of  neutrals  must  be  appHed  to  the  one  which  refuses 
to  join  in  a  return  to  law  and  order.  Our  problem  is 
to  compel  that  joint  acceptance  of  a  compromise 
which  we  proposed  in  our  note  to  the  belHgerents  in 
February. — Germany  is  ready  for  acceptance;  the 
pressure  must  be  applied  to  England. 

With  the  attainment  of  this  end — the  acceptance 
of  the  Declaration  of  London  and  its  contraband  hst 
by  England  and  Germany  and  the  return  by  Ger- 
many to  lawful  use  of  her  war  vessels — both  belli- 
gerents return  to  the  limits  of  law.  Neutral  trade 
rights  are  recovered  and  established  for  all  time.  Our 
excuse  for  stopping  the  export  of  arms  ceases.  In 
unhindered  access  to  the  arms  supphes  of  the  oversea 
world,  barred  to  Germany,  England  enjoys  a  great 
advantage  from  her  sea  power,  the  only  advantage 
which  she  can  be  allowed  to  enjoy  without  destroying 
the  rights  of  those  who  have  had  no  part  in  making 
or  prosecuting  this  war. 


APPENDIX 

President   Wilson's   Appeal    for    Impartiality   and 
Restraint  in  Discussing  the  War 

My  Felloio  Countrymen:  I  suppose  that  every  thoughtful 
man  in  America  has  asked  himself  during  the  last  troubled 
weeks  what  influence  the  European  War  may  exert  upon  the 
United  States,  and  I  take  the  liberty  of  addressing  a  few 
words  to  you  in  order  to  point  out  that  it  is  entirely  within 
our  own  choice  what  its  effects  upon  us  will  be  and  to  urge 
very  earnestly  upon  you  the  sort  of  speech  and  conduct  which 
will  best  safeguard  the  nation  against  distress  and  disaster. 

The  effect  of  the  war  upon  the  United  States  will  depend 
upon  what  American  citizens  say  or  do.  Every  man  who  really 
loves  America  will  act  and  speak  in  the  true  spirit  of  neutrality, 
which  is  the  spirit  of  impartiality  and  fairness  and  friendliness 
to  all  concerned.  The  spirit  of  the  nation  in  this  critical 
matter  will  be  determined  largely  by  what  individuals  and 
society  and  those  gathered  in  public  meetings  do  and  say, 
upon  what  newspapers  and  magazines  contain,  upon  what  our 
ministers  utter  in  their  pulpits  and  men  proclaim  as  their 
opinions  on  the  streets. 

The  people  of  the  United  States  are  drawn  from  many 
nations,  and  chiefly  from  the  nations  now  at  war.  It  is  natural 
and  inevitable  that  there  should  be  the  utmost  variety  of 
sympathy  and  desire  among  them  with  regard  to  the  issues  and 
circumstances  of  the  conflict.  Some  will  wish  one  nation,  others 
another,  to  succeed  in  the  momentous  struggle.  It  will  be  easy 
to  excite  passion  and  difficult  to  allay  it.  Those  responsible 
for  exciting  it  will  assume  a  heavy  responsibility;  responsibility 
for  no  less  a  thing  than  that  the  people  of  the  United  States, 
whose  love  of  their  country  and  whose  loyalty  to  its  govern- 
ment should  unite  them  as  Americans  all,  bound  in  honor  and 
affection  to  think  first  of  her  and  her  interests,  may  be  divided 
in  camps  of  hostile  opinions,  hot  against  each  other,  involved 
in  the  war  itself  in  impulse  and  opinion,  if  not  in  action.  Such 
diversions  among  us  would  be  fatal  to  our  peace  of  mind  and 
might  seriously  stand  in  the  way  of  the  proper  performance 
of  our  duty  as  the  one  great  nation  at  peace,  the  one  people 
holding  itself  ready  to  play  a  part  of  impartial  mediation  and 
speak  the  counsels  of  peace  and  accommodation,  not  as  a 
partisan,  but  as  a  friend. 


312   ECONOMIC  ASPECTS  OF  THE  WAR 

I  venture,  therefore,  my  fellow  coimtrjincn,  to  speak  a 
solemn  word  of  warning  to  you  against  that  deepest,  most 
subtle,  most  essential  l)reach  of  neutrality  which  may  spring 
out  of  partisanship,  out  of  passionately  taking  sides.  The 
United  States  must  be  neutral  in  fact  as  well  as  in  name 
during  these  days  that  are  to  try  men's  souls.  We  must  be 
impartial  in  thought  as  well  as  in  action,  must  put  a  curb  upon 
our  sentiments  as  well  as  upon  every  transaction  that  might 
be  construed  as  a  preference  of  one  party  to  the  struggle  before 
another. 

My  thought  is  of  America.  I  am  speaking,  I  feel  sure,  the 
earnest  wish  and  purpose  of  every  thoughtful  American  that 
this  great  country  of  ours,  which  is,  of  course,  the  first  in  our 
thoughts  and  in  our  hearts,  should  show  herself  in  this  time 
of  peculiar  trial  a  nation  fit  beyond  others  to  exhibit  the  fine 
poise  of  undisturbed  judgment,  the  dignity  of  self-control,  the 
efficiency  of  dispassionate  action,  a  nation  that  neither  sits  in 
judgment  upon  others  nor  is  disturbed  in  her  own  counsels 
and  which  keeps  herself  fit  and  free  to  do  what  is  honest  and 
disinterested  and  truly  serviceable  for  the  peace  of  the  world. 

Shall  we  not  resolve  to  put  upon  ourselves  the  restraint 
which  will  bring  to  our  people  the  happiness  and  the  great 
and  lasting  influence  for  peace  we  covet  for  them? 

WOODROW    WiLSOX. 

Washington,  August  18,  1914. 


British  August  20  Order  in  Council 

Whereas  during  the  present  hostilities  the  naval  forces  of 
His  Majesty  will  co-operate  with  the  French  and  Russian  naval 
forces;  and 

Whereas  it  is  desirable  that  the  naval  operations  of  the 
allied  forces  so  far  as  they  afi'ect  neutral  ships  and  commerce 
should  be  conducted  on  similar  principles;  and 

Whereas  the  governments  of  France  and  Russia  have  in- 
formed His  Majesty's  government  that  during  the  present 
hostilities  it  is  their  intention  to  act  in  accordance  with  the 
provisions  of  the  Convention  known  as  the  Declaration  of 
London,  signed  on  the  26th  day  of  February,  1909,  so  far  as 
may  be  practicable. 

Now,  therefore,  His  Majesty,  by  and  with  the  advice  of  His 
Privy  Council,  is  pleased  to  order,  and  it  is  hereby  ordered, 
that  during  the  present  hostilities  the  Convention  known  as  the 
Declaration  of  London  shall,  subject  to  the  following  additions 
and  modifications,  be  adopted  and  put  in  force  by  His 
Majesty's  government  as  if  the  same  had  been  ratified  by  His 
Majesty: 


APPENDIX  313 

The  additions  and  modifications  are  as  follows: 

(1)  The  lists  of  absolute  and  conditional  contraband  con- 
tained in  the  Proclamation  dated  August  4,  1914,  shall  be 
substituted  for  the  lists  contained  in  Articles  22  and  24  of 
the  said  Declaration. 

(2)  A  neutral  vessel  which  succeeded  in  carrying  contraband 
to  the  enemy  with  false  papers  may  be  detained  for  having 
carried  such  contraband  if  she  is  encountered  before  she  has 
completed  her  return  voyage. 

(3)  The  destination  referred  to  in  Article  33  may  be  inferred 
from  any  sufficient  evidence,  and  (in  addition  to  the  pre- 
sumption laid  down  in  Article  34)  shall  be  presumed  to  exist 
if  the  goods  are  consigned  to  or  for  an  agent  of  the  enemy 
state  or  to  or  for  a  merchant  or  other  person  under  the 
control  of  the  authorities  of  the  enemy  state. 

(4)  The  existence  of  a  blockade  shall  be  presumed  to  be 
known — 

(a)  to  all  ships  which  sailed  from  or  touched  at  an  enemy 
port  a  sufficient  time  after  the  notification  of  the  blockade  to 
the  local  authorities  to  have  enabled  the  enemy  government 
to  make  known  the  existence  of  the  blockade; 

(b)  to  all  ships  which  sailed  from  or  touched  at  a  British 
or  allied  port  after  the  publication  of  the  declaration  of 
blockade. 

(5)  Notwithstanding  the  provisions  of  Article  35  of  the  said 
Declaration,  conditional  contraband,  if  shown  to  have  the 
destination  referred  to  in  Article  33,  is  liable  to  capture, 
to  whatever  port  the  vessel  is  bound  and  at  whatever  port  the 
cargo  is  to  be  discharged. 

(6)  The  General  Report  of  the  Drafting  Committee  on  the 
said  Declaration  presented  to  the  Naval  Conference  and 
adopted  by  the  conference  at  the  eleventh  plenary  meeting  on 
February  25,  1909,  shall  be  considered  by  all  prize  courts  as 
an  authoritative  statement  of  the  meaning  and  intention  of 
the  said  Declaration,  and  such  courts  shall  construe  and  inter- 
pret the  provisions  of  the  said  Declaration  by  the  light  of  the 
commentary  given  therein. 


The  British  October  29  Order  in  Council 

1.  During  the  present  hostilities  the  provisions  of  the 
Convention  known  as  the  Declaration  of  London  shall,  subject 
to  the  exclusion  of  the  lists  of  contraband  and  non-contraband, 
and  to  the  modification  hereinafter  set  out,  be  adopted  and  put 
in  force  by  His  Majesty's  government.  The  modifications  are 
as  follows: 

(I)  A  neutral  vessel,  with  papers  indicating  a  neutral 
destination,   which   notwithstanding   the   destination   shown   on 


314   ECONOMIC  ASPECTS  OF  THE  WAR 

the  papers,  proceeds  to  an  enemy  port,  shall  be  liable  to 
capture  and  condemnation  if  she  is  encountered  before  the 
end  of  her  next  voyage. 

(II)  The  destination  referred  to  in  Article  33  of  the  said 
Declaration  shall  (in  addition  to  the  presumptions  laid  down 
in  Article  34)  be  presumed  to  exist  if  the  goods  are  consigned 
to  or  for  an  agent  of  the  enemy  state. 

(III)  Notwithstanding  the  provisions  of  Article  35  of  the 
said  Declaration,  conditional  contraband  shall  be  liable  to 
capture  on  board  a  vessel  bound  for  a  neutral  port  if  the 
goods  are  consigned  "to  order,"  or  if  the  ship's  papers  do  not 
show  who  is  the  consignee  of  the  goods,  or  if  they  show  a 
consignee  of  the  goods  in  territory  belonging  to  or  occupied 
by  the  enemy. 

(IV)  In  the  cases  covered  by  the  preceding  paragraph  (III) 
it  shall  lie  upon  the  owners  of  the  goods  to  prove  that  their 
destination  was  innocent. 

2.  Where  it  is  shown  to  the  satisfaction  of  one  of  His 
Majesty's  principal  Secretaries  of  State  that  the  enemy  gov- 
ernment is  drawing  supplies  for  its  armed  forces  from  or 
through  a  neutral  country,  he  may  direct  that  in  respect  of 
ships  bound  for  a  port  in  that  country,  Article  35  of  the  said 
Declaration  shall  not  apply.  Such  direction  shall  be  notified 
in  the  London  Gazette  and  shall  operate  until  the  same  is 
withdrawn.  So  long  as  such  direction  is  in  force,  a  vessel 
which  is  carrying  conditional  contraband  to  a  port  in  that 
country  shall  not  be  immune  from  capture. 


The  British  March  11  Order  in  Council 

1.  No  merchant  vessel  which  sailed  from  her  port  of 
departure  after  the  first  of  March,  1915,  shall  be  allowed  to 
proceed  on  her  voyage  to  any  German  port. 

Unless  the  vessel  receives  a  pass  enabling  her  to  proceed 
to  some  neutral  or  allied  port  to  be  named  in  the  pass,  goods 
on  board  any  such  vessel  must  be  discharged  in  a  British  port 
and  placed  in  the  custody  of  the  marshal  of  the  prize  court. 
Goods  so  discharged,  not  being  contraband  of  war,  shall,  if 
not  requisitioned  for  the  use  of  His  Majesty,  be  restored  by 
order  of  the  court,  upon  such  terms  as  the  court  may  in  the 
circumstances  deem  to  be  just,  to  the  person  entitled  thereto. 

2.  No  merchant  vessel  which  sailed  from  any  German  port 
after  the  first  of  March,  1915,  shall  be  allowed  to  proceed  on  her 
voyage  with  any  goods  on  board  laden  at  such  port. 

All  goods  laden  at  such  port  must  be  discharged  in  a  British 
or  allied  port.  Goods  so  discharged  in  a  British  port  shall  be 
placed  in  the  custody  of  the  marshal  of  the  prize  court,  and, 


APPENDIX  315 

if  not  requisitioned  for  the  use  of  His  Majesty,  shall  be 
detained  or  sold  under  the  direction  of  the  prize  court.  The 
proceeds  of  goods  so  sold  shall  be  paid  into  court  and  dealt 
with  in  such  a  manner  as  the  court  may  in  the  circumstances 
deem  to  be  just. 

Provided,  that  no  proceeds  of  the  sale  of  such  goods  shall 
be  paid  out  of  court  until  the  conclusion  of  peace,  except  on 
the  application  of  the  proper  officer  of  the  crown,  unless  it  be 
shown  that  the  goods  had  become  neutral  property  before  the 
issue  of  this  order. 

Provided  also,  that  nothing  herein  shall  prevent  the  release 
of  neutral  property  laden  at  such  enemy  port  on  the  appli- 
cation of  the  proper  officer  of  the  crown. 

3.  Every  merchant  vessel  which  sailed  from  her  port  of 
departure  after  the  first  of  March,  1915,  on  her  way  to  a  port, 
other  than  a  German  port,  carrying  goods  with  an  enemy 
destination,  or  which  are  enemy  property,  may  be  required 
to  discharge  such  goods  in  a  British  or  allied  port.  Any  goods 
so  discharged  in  a  British  port  shall  be  placed  in  the  custody 
of  the  marshal  of  the  prize  court,  and,  unless  they  are  contra- 
band of  war,  shall,  if  not  requisitioned  for  the  use  of  His 
Majesty,  be  restored  by  order  of  the  court,  upon  such  terms 
as  the  court  may  in  the  circumstances  deem  to  be  just  to  the 
person  entitled  thereto. 

Provided,  that  this  article  shall  not  apply  in  any  case  falling 
within  Articles  2  or  4  of  this  order. 

4.  Every  merchant  vessel  which  sailed  from  a  port  other 
than  a  German  port  after  the  first  of  March,  1915,  having  on 
board  goods  which  are  of  enemy  origin  or  are  enemy  property 
may  be  required  to  discharge  such  goods  in  a  British  or  allied 
port.  Goods  so  discharged  in  a  British  port  shall  be  placed 
in  the  custody  of  the  marshal  of  the  prize  court,  and  if  not 
requisitioned  for  the  use  of  His  Majesty  shall  be  detained  or 
sold  under  the  direction  of  the  prize  court.  The  proceeds  of 
goods  so  sold  shall  be  paid  into  court  and  dealt  with  in  such 
manner  as  the  court  may  in  the  circumstances  deem  to  be  just. 

Provided,  that  no  proceeds  of  sale  of  such  goods  shall  be 
paid  out  of  court  until  the  conclusion  of  peace  except  on  the 
application  of  the  proper  officer  of  the  crown,  unless  it  be 
shown  that  the  goods  had  become  neutral  property  before  the 
issue  of  this  order. 

Provided,  also,  that  nothing  herein  shall  prevent  the  release 
of  neutral  property  of  enemy  origin  on  the  application  of  the 
proper  officer  of  the  crown. 

5.  Any  person  claiming  to  be  interested  in,  or  to  have  any 
claim  in  respect  of,  any  goods  (not  being  contraband  of  war) 
placed  in  the  custody  of  the  marshal  of  the  prize  court  under 
this  order,  or  in  the  proceeds  of  such  goods,  may  forthwith 
issue  a  writ  in  the  prize  court  against  the  proper  officer  of  the 


316   ECONOMIC  ASPECTS  OF  THE  WAR 

crown  and  apply  for  an  order  that  the  goods  should  be  restored 
to  him,  or  that  their  proceeds  should  be  paid  to  him,  or  for 
such  other  order  as  the  circumstances  of  the  case  may  require. 
The  practice  and  procedure  of  the  prize  court  shall,  so  far 
as  applicable,  be  followed  mutatis  mutandis  in  any  proceedings 
consequential   upon   this   order. 

6.  A  merchant  vessel  which  has  cleared  for  a  neutral  port 
from  a  British  or  allied  port,  or  which  has  been  allowed  to 
pass,  having  an  ostensible  destination  to  a  neutral  port,  and 
proceeds  to  an  enemy  port,  shall,  if  captured  on  any  subsequent 
voyage,  be  liable  to  condemnation. 

7.  Nothing  in  this  order  shall  be  deemed  to  affect  the 
liability  of  any  vessel  or  goods  to  capture  or  condemnation 
independently  of  this  order. 

8.  Nothing  in  this  order  shall  prevent  the  relaxation  of  the 
provisions  of  this  order  in  respect  of  the  merchant  vessels  of 
any  country  which  declares  that  no  commerce  intended  for  or 
originating  in  Germany  or  belonging  to  German  subjects 
shall  enjoy  the  protection  of  its  flag. 


Extract  from  British  March  23  Order  in  Council, 
Revising   Rule    29    of   the    Prize    Court   and 

EMPOWERING    ENGLAND    TO     SEIZE    ANY     NeUTRAL 

Vessel 

Where  it  is  made  to  appear  to  the  Judge,  on  the  application 
of  the  proper  officers  of  the  court,  that  it  is  desired  to  requisi- 
tion on  behalf  of  His  Majesty  a  ship  in  respect  of  which  no 
final  decree  of  condemnation  has  been  made,  he  shall  order 
that  the  ship  shall  be  appraised,  and  that  upon  an  undertaking 
being  given  in  accordance  with  Rule  5  of  this  order,  the  ship 
shall  be  released  and  delivered  to  the  crown. 


United  States  Note  presented  jointly  to  Britain 
AND  Germany,  February  20,  suggesting  Modi- 
fications IN   the   Severity  of  their  War  at 

Sea 

"In  view  of  the  correspondence  which  has  passed  between 
this  government  and  Great  Britain  and  Germany  respectively 
relative  to  the  declaration  of  a  war  zone  by  the  German  Ad- 


APPENDIX  317 

miralty,  and  the  use  of  neutral  flags  by  British  merchant 
vessels,  this  government  ventures  to  express  the  hope  that  the 
two  belligerent  governments  may,  through  reciprocal  conces- 
sions, find  a  basis  for  agreement  which  will  reheve  neutral 
vessels  engaged  in  peaceful  commerce  from  the  great  dangers 
which  they  will  incur  on  the  high  seas  adjacent  to  the  coasts 
of  the  belligerents. 

"The  government  of  the  United  States  respectfully  suggests 
that  an  agreement  in  terms  like  the  following  might  be  entered 
into.  This  suggestion  is  not  to  be  regarded  as  in  any  sense 
a  proposal  made  by  this  government,  for  it  of  course  fully 
recognizes  that  it  is  not  its  privilege  to  propose  terms  of  agree- 
ment between  Great  Britain  and  Germany,  even  though  the 
matter  be  one  in  which  it  and  the  people  of  the  United  States 
are  directly  and  deeply  interested.  It  is  merely  venturing  to 
take  the  liberty  which  it  hopes  may  be  accorded  a  sincere 
friend  desirous  of  embarrassing  neither  nation  involved,  and 
of  serving,  if  it  may,  the  common  interests  of  humanity.  The 
course  outlined  is  offered  in  the  hope  that  it  may  draw  forth 
the  views  and  elicit  the  suggestions  of  the  British  and  German 
governments  on  a  matter  of  capital  interest  to  the  whole 
world. 

"Germany  and  Great  Britain  to  agree: — 

"First.  That  neither  will  sow  any  floating  mines,  whether 
upon  the  high  seas  or  in  territorial  waters;  that  neither  will 
plant  on  the  high  seas  anchored  mines  except  within  cannon 
range  of  harbors  for  defensive  purposes  only;  and  that  all 
mines  shall  bear  the  stamp  of  the  government  planting  them, 
and  be  so  constructed  as  to  become  harmless  if  separated  from 
their  moorings. 

"Second.  That  neither  will  use  submarines  to  attack  mer- 
chant vessels  of  any  nationality  except  to  enforce  the  right 
of  visit  and  search. 

"Third.  That  each  will  require  their  respective  merchant 
vessels  not  to  use  neutral  flags  for  the  purpose  of  disguise  or 
ruse  de  guerre. 

"Germany  to  agree: — 

"That  all  importations  of  food  or  foodstuffs  from  the  United 
States  (and  from  sucli  other  neutral  countries  as  may  ask  it) 
into  Germany  shall  be  consigned  to  agencies  to  be  designated 
by  the  United  States  government ;  that  these  American  agencies 
shall  have  entire  charge  and  control,  without  interference  on 
the  part  of  the  German  government,  of  the  receipt  and  dis- 
tribution of  such  importations,  and  shall  distribute  them  solely 
to  retail  dealers  bearing  licenses  from  the  German  government 
entitling  them  to  receive  and  furnish  such  food  and  foodstuffs 
to  non-combatants  only;  that  any  violation  of  the  terms  of 
the  retailers'  licenses   shall  work   a   forfeiture  of  their   rights 


318   ECOxNOMIC  ASPECTS  OF  THE  WAR 

to  receive  such  food  and  foodstuffs  for  this  purpose;  and  that 
such  food  and  foodstuffs  will  not  be  requisitioned  by  the 
German  government  for  any  purpose  whatsoever  or  be  diverted 
to  the  use  of  tlie  armed  forces  of  Germany. 

"Great  Britain  to  agree: — 

"That  food  and  foodstuffs  will  not  be  placed  upon  the  abso- 
lute contraband  list,  and  that  shipments  of  such  commodities 
will  not  be  interfered  with  or  detained  by  British  authorities 
if  consigned  to  agencies  designated  by  the  United  States 
government  in  Germany  for  the  receipt  and  distribution  of 
such  cargoes  to  licensed  German  retailers  for  distribution  solely 
to  the  non-combatant  population. 

"In  submitting  this  proposed  basis  of  agreement  this  govern- 
ment does  not  wish  to  be  understood  as  admitting  or  denying 
any  belligerent  or  neutral  right  established  by  the  principles 
of  international  law,  but  would  consider  the  agreement,  if 
acceptable  to  the  interested  Powers,  a  modus  vivendi,  based 
upon  expediency  rather  than  legal  right,  and  as  not  binding 
upon  the  United  States  either  in  its  present  form  or  in  a 
modified  form  until  accepted  by  this  government," 


Letter  of  President  Jefferson  to  Thomas  Pinckney, 
United  States  Minister  to  England,  regard- 
ing England's  Stoppage  of  our  Food  Ship- 
ments TO  France 

Philadelphia,  September  7,  1793. 

Sir: — We  have  received,  tlirough  a  channel  which  cannot  be 
considered  as  authentic,  the  copy  of  a  paper,  styled  "Addi- 
tional Instructions  to  the  Commanders  of  His  Majesty's  Ships 
of  War  and  Privateers,"  &c.,  dated  at  St.  James,  June  8,  1793. 
If  this  paper  be  authentic,  I  have  little  doubt  but  that  you  will 
have  taken  measures  to  forward  it  to  me.  But  as  your  commu- 
nication of  it  may  miscarry,  and  time  in  the  meanwhile  will  be 
lost,  it  has  been  thought  better  that  it  should  be  supposed 
authentic  and  that  on  that  supposition  I  should  notice  to  you 
its  very  exceptional  nature,  and  the  necessity  of  obtaining 
explanations  on  the  subject  from  the  British  government; 
desiring  at  the  same  time  that  you  will  consider  this  letter  as 
provisionally  written  only,  and  as  if  never  written,  in  the  event 
that  the  paper  which  is  the  occasion  of  it  be  not  genuine. 


APPENDIX  319 

The  first  article  of  it  (the  British  Order)  permits  alt  vessels 
laden  wholly  or  in  part  with  corn,  flour,  or  meal,  bound  to  any 
port  in  France  to  be  stopped  and  sent  into  any  British  port, 
to  be  purchased  by  that  government,  or  to  be  released  only  on 
the  condition  of  security  given  by  the  master  that  he  will  pro^ 
ceed  to  dispose  of  his  cargo  in  the  ports  of  some  country  in 
amity  with  His  Majesty. 

This  article  is  so  manifestly  contrary  to  the  law  of  nations 
that  nothing  more  would  seem  necessary  than  to  observe  that 
it  is  so.  Reason  and  usage  have  established  that  when  two 
nations  go  to  icar,  those  who  choose  to  live  in  peace  retain  their 
natural  right  to  pursue  their  agriculture,  manufactures,  and 
other  ordinary  vocations,  to  carry  the  produce  of  their  industry 
for  exchange  to  all  nations,  belligerent  or  neutral,  as  usual,  to 
go  and  come  freely  without  injury  or  molestation,  and,  in 
short,  that  the  war  among  others  shall  be  for  them  as  if  it  did 
not  exist.  One  restriction  on  their  natural  rights  has  been 
submitted  to  by  nations  at  peace;  that  is  to  say,  that  of  not 
furnishing  to  either  party  implements  merely  of  war  for  the 
annoyance  of  the  other,  nor  anything  whatever  to  a  place 
blockaded  by  its  enemy. 

What  these  implements  of  war  are  has  been  so  often  agreed 
and  is  so  well  understood  as  to  leave  little  question  about 
them  at  this  day.  There  does  not  exist,  perhaps,  a  nation  in 
our  common  hemisphere,  which  has  not  made  a  particular 
enumeration  of  them  in  some  or  all  of  their  treaties,  under  the 
name  of  contraband.  It  suffices  for  the  present  occasion  to 
say  that  corn,  flour,  and  meal  are  not  of  the  class  of  contra- 
band, and,  consequently,  remain  articles  of  free  commerce. 
A  culture  which,  like  that  of  the  soil,  gives  employment  to  such 
a  proportion  of  mankind,  could  never  be  suspended  by  the 
whole  earth  or  interrupted  for  them,  whenever  any  two  nations 
should  think  proper  to  go  to  war. 

The  state  of  war  then  existing  between  Great  Britain  and 
France  furnishes  no  legitimate  right  either  to  interrupt  the 
agriculture  of  the  United  States  or  the  peaceable  exchange  of 
its  produce  with  all  nations,  and  consequently  the  assumption 
of  it  will  be  as  lawful  hereafter  as  now,  in  peace  as  in  war. 
No  ground,  acknowledged  by  the  common  reason  of  mankind, 
authorizes  this  act  now,  and  unacknowledged  ground  may  be 
taken  at  any  time  and  at  all  times. 

We  see  then  a  practice  begun  to  which  no  time,  no  circum- 
stances, prescribe  any  limits,  and  which  strikes  at  the  root  of 
our  agriculture,  that  branch  of  industry  which  gives  food, 
clothing,  and  comfort  to  the  great  mass  of  the  inhabitants  of 
these  states.  If  any  nation  whatever  has  a  right  to  shut  up  to 
our  produce  all  the  ports  of  the  earth  except  her  own  and 
those  of  her  friends  she  may  shut  up  these  also  and  so  confine 
us  within  our  own  limits.     No  nation  can  subscribe  to  such 


320   ECONOMIC  ASPECTS  OF  THE  WAR 

pretensions;  no  nation  can  agree,  at  the  mere  will  or  interest  of 
another,  to  have  its  peaceable  industry  suspended  and  its  citi- 
zens reduced  to  idleness  and  icant.  The  loss  of  our  produce 
destined  for  foreign  markets,  or  that  loss  which  would  result 
from  an  arbitrary  restraint  of  our  markets,  is  a  tax  too  serious 
for  us  to  acquiesce  in.  It  is  not  enough  for  a  nation  to  say 
we  and  our  friends  will  buy  your  produce.  We  have  a  right 
to  answer  that  it  suits  us  better  to  sell  to  their  enemies  as 
well  as  their  friends.  Our  ships  do  not  go  to  France  to  return 
empty.  They  go  to  exchange  the  surplus  of  one  produce  which 
we  can  spare  for  surpluses  of  other  kinds  which  they  can 
spare  and  we  want;  which  they  furnish  on  better  terms,  and 
more  to  our  mind,  than  Great  Britain  or  her  friends. 

We  have  a  right  to  judge  for  ourselves  what  market  best 
suits  us  and  they  have  none  to  forbid  to  us  the  enjoyment  of 
the  necessaries  and  comforts  which  we  may  obtain  from  any 
other  independent  country. 

This  act,  too,  tends  directly  to  draw  us  from  that  state  of 
peace  in  which  we  are  wishing  to  remain.  It  is  an  essential 
character  of  neutrality  to  furnish  no  aids  (not  stipulated  by 
treaty)  to  one  party  which  we  are  not  equally  ready  to  furnish 
to  the  other.  If  we  permit  corn  to  be  sent  to  Great  Britain 
and  her  friends,  we  are  equally  bound  to  permit  it  to  France. 
To  restrain  it  icould  be  a  partiality  which  might  lead  to  a  war 
with  France,  and  between  restraining  it  ourselves  and  permit- 
ting her  enemies  to  restrain  it  unrightfully  is  not  difference. 
She  would  consider  this  as  a  mere  pretext,  of  which  she  would 
not  be  the  dupe;  and  on  what  honorable  ground  could  we 
otherwise  explain  it?  Thus  v^e  should  see  ourselves  plunged 
by  this  unauthorized  act  of  Great  Britain  into  a  war  with 
which  we  meddle  not,  and  which  we  wish  to  avoid  if  justice 
to  all  parties  and  from  all  parties  will  enable  us  to  avoid  it. 
In  the  case  where  we  found  ourselves  obliged  by  treaty  to 
withhold  from  the  enemies  of  France  the  right  of  arming  in 
our  ports,  we  thought  ourselves  in  justice  bound  to  withhold 
the  same  right  from  France  also,  and  we  did  it. 

Were  we  to  withhold  from  her  {France)  supplies  of  pro- 
visions, we  should  in  like  manner  be  bound  to  loithhold  them 
from  her  enemies  also,  and  thus  shut  to  ourselves  all  the  ports 
of  Europe  where  corn  is  in  demand  or  make  ourselves  parties 
in  the  tear.  This  is  a  dilemma  which  Great  Britain  has  no 
right  to  force  upon  us,  and  for  which  no  pretext  can  be  found 
in  any  part  of  our  conduct.  She  may,  indeed,  feel  the  desire 
of  starving  an  enemy  nation,  but  she  can  have  no  right  of  doing 
it  at  our  loss  nor  of  making  us  the  instruments  of  it. 

The  President  therefore  desires  that  you  will  immediately 
enter  into  explanations  on  this  subject  with  the  British  govern- 
ment. Lay  before  them  in  friendly  and  temperate  terms  all 
the  demonstrations  of  the  injury  done  us  by  this   act,  and 


APPENDIX  321 

endeavor  to  obtain  a  revocation  of  it  and  full  indemnification 
to  any  citizens  of  these  states  who  may  have  suifered  by  it  in 
the  meantime.  Accompany  your  representations  by  every 
assurance  of  our  earnest  desire  to  live  on  terms  of  the  best 
friendship  and  harmony  with  them  and  to  found  our  expecta- 
tions of  justice  on  their  part  on  a  strict  observance  of  it  on 
ours. 

It  is  with  concern,  however,  I  am  obliged  to  observe  that  so 
marked  has  been  the  inattention  of  the  British  court  to  every 
application  which  has  been  made  to  them  on  any  subject  by 
this  government  (not  a  single  answer  I  believe  having  ever 
been  given  to  one  of  them,  except  in  the  act  of  exchanging 
a  minister),  that  it  may  become  unavoidable,  in  certain  cases, 
where  an  answer  of  some  sort  is  necessary,  to  consider  their 
silence  as  an  answer.  Perhaps  this  is  their  intention.  Still, 
however,  desirous  of  furnishing  no  color  of  offense,  we  do  not 
wish  you  to  name  to  them  any  term  for  giving  an  answer. 
Urge  one  as  much  as  you  can  without  commitment,  and  on 
the  first  day  of  December  be  so  good  as  to  give  us  information 
of  the  state  in  which  this  matter  is,  that  it  may  be  received 
during  the  session  of  Congress.  .  .  . 

Whether  these  explanations  with  the  British  government 
shall  be  verbal  or  in  writing,  is  left  to  yourself.  Verbal  com- 
munications are  very  insecure;  for  it  is  only  to  deny  them  or 
to  change  their  terms,  in  order  to  do  away  their  effect  at  any 
time.  Those  in  writing  have  as  many  and  obvious  advantages, 
and  ought  to  be  preferred,  unless  there  be  obstacles  of  which 
we  are  not  apprized. 

I  have  the  honor  to  be,  with  great  and  sincere  esteem,  dear 
sir,  your  most  obedient  servant. 


Minority  Report  of  the  Committee  on  Merchant 
Marine  of  the  United  States  Chamber  of 
Commerce,  Favoring  the  Ship  Purchase  Bill 

I  dissent  from  the  views  of  the  majority  of  this  Committee, 
and  approve  of  the  Ship  Purchase  Bill  now  before  Congress. 

The  emergency  is  such  that  the  ordinary  arguments  against 
the  government  entering  the  field  of  private  business  do  not 
apply. 

The  emergency  is  the  re-establishment,  or  the  maintenance, 
of  our  trade  communication  with  neutral  and  belligerent  Euro- 
pean countries  which  are  our  chief  markets  and  sources  of 
supply. 

I   conceive   that  the   chief  task   confronting  us   today  is   to 


322   ECONOMIC  ASPECTS  OF  THE  WAR 

uphold,  as  against  all  Ix-lligerents,  the  rights  of  our  merchants 
to  the  i^eaceful  ])ursuit  of  commerce  of  all  sorts,  uninterrupted 
excepting  for  contraband  of  war  sent  to  belligerents.  This  is 
the  principle  for  which  this  country  has  fought  successfully  at 
recent  international  conferences. 

This  principle  is  being  increasingly  violated  by  belligerents 
in  the  present  war.  I  apprehend  that  vessels  owned  by  the 
United  States  Government  will  have  a  standing  that  will  compel 
respect  by  all  belligerents.  There  can  be  no  question  of  the 
good  faith  in  which  they  were  purchased,  no  matter  what  the 
source.  It  can  be  guaranteed  that  they  carry  no  contraband. 
All  excuse  for  interfering  with  the  commerce  they  carry  will 
be  removed. 

As  a  theory,  government  ownership  of  merchant  vessels  is 
wrong.  As  a  measure  to  meet  the  present  economic  emergency, 
it  is  justified  and  right. 

(Signed)     E.  J.  Clapp. 

February  1,  1915. 


Declaration  which  American  Associate  Members  of 
THE  Liverpool  Cotton  Exchange  were  asked 
TO  Sign 

Declaration 

I,  of  ,   an   Associate   Member  of 

the  Liverpool  Cotton  Association,  do  solemnly  and  sincerely 
declare  that  neither  I  nor  my  firm  nor  any  partner  in  the  same 
nor  any  branch  house  or  other  firm  or  firms  in  which  I  or  any 
one  of  my  partners  may  be  directly  or  indirectly  pecuniarily 
interested  will  trade  or  have  dealings  with  any  person  or  a 
member  or  representative  of  any  firm  or  person  domiciled  or 
carrying  on  business  in  any  state  at  present  at  war  with  His 
Britannic  Majesty  until  such  time  as  peace  may  have  been 
declared,  and  I  further  undertake  when  trading  wdth  subjects 
of  neutral  countries  to  make  all  necessary  enquiries  in  order 
to  satisfy  myself  as  to  the  ultimate  destination  of  the  goods 
and  that  none  of  them  are  intended  for  consumption  in  or  for 
transit  throu^  any  state  at  war  with  His  Majesty. 

Declared  this  day  of 

Witness 

Address  of  Witness 


APPENDIX 


323 


Record  of  British  Detentions  of  American  Copper 
Exports  to  Neutrals,  Autumn,   1914 


British  Detentions  of  Copper  Destined  for  Italy, 
October  to  November,  1914 


Copper 

Destina- 

Cargo 

Ship 

Nationality 

tion 

Sailed 

Seized 

'tons) 

Ascot 

British 

Italy 

Oct. 

10 

Oct.   26 

1340 

Palermo 

Italian 

' 

Oct. 

20 

Nov.    2 

300 

Regina  d'ltalia 

a 

< 

Oct. 

15 

Oct.  26 

1180 

Italia 

a 

' 

Oct. 

24. 

Nov.    8 

900 

Kroonland 

American 

i 

Oct. 

15 

Nov.    8 

1300 

San  Giovanni 

Italian 

< 

Oct. 

14. 

Oct.   26 

550 

Duca  di  Genoa 

(( 

( 

Oct. 

17 

Nov.    8 

300 

Verona 

(» 

< 

Oct. 

24 

Nov.    8 

325 

Europa 

(( 

' 

Oct. 

21 

Nov.    8 

300 

San  Guglielmo 

<< 

' 

Oct. 

21 

Nov.    8 

700 

Tabor 

Norwegian 

( 

Oct. 

26 

Nov.  13 

1020 

Taurus 

American 

( 

Nov. 

1 

Nov.  13 

400 

Perugia 

British 

i 

Nov. 

1 

Nov.  13 

515 

Norheim 

Norwegian 

' 

Oct. 

17 

Nov.  18 
Total 

425 

9555 

21,403,200  lbs. 

British  Detentions  of  Copper  Destined  to  Sweden 
(and  Norway) 


Copper 

Destina- 

Cargo 

Ship 

Nationality 

tion 

Sailed 

Seized    (tons) 

Sif 

Sweden 

Oct.   31 

Nov.  18       400 

Sigrum 

Norwegian 

Nov.    8 

Nov.  26       450 

Ran 

Swedish 

Nov.  13 

Dec.     1       650 

Antones 

Norwegian 

Oct.  22 

Nov.  14       650 

Tyr 

(( 

Oct.   29 

Nov.  19       750 

Francisco 

British 

Oct.   17 

Nov.    2       200 

Idaho 

'* 

Oct.  24 

Nov.  10       200 

Toronto 

ti 

Oct.  31 

Nov.  15       200 

Marengo 

«( 

Oct.   10 

Oct.   25       200 

Galileo 

n 

Nov.    7 

Nov.  26       200 

New  Sweden 

Swedish 

Dec.     6 

Dec.  28       730 

Soerland 

Norwegian 

Nov.  27 

Dec.  28       600 

Canton 

Swedish 

Nov.  12 

Dec.     1       375 

Total     6Q05 

12,555,200  lbs. 

324   ECONOMIC  ASPECTS  OF  THE  WAR 

Copper  Agreement  between  United  States  Export- 
ers AND  British  Admiralty 

Copper  from  United  States  of  America  to  Neutral  Countries 

"Whilst  His  Majesty's  Government  are  at  present,  so  far  as 
they  are.  able,  preventing  any  copper  from  reaching  their 
enemies,  they  have  no  desire  to  interfere  in  any  way  with  the 
sales  of  the  United  States  copper  producers  to  purchasers  in 
neutral  countries  which  are  willing  to  guarantee  that  the  copper 
which  they  import  is  for  the  consumption  of  those  neutral 
countries. 

"If  the  United  States  producers  would  be  willing  to  co-op- 
erate, His  Majesty's  Government  will  not  interfere  with  their 
copper  shipments  to  those  'neutral  countries  which  have  placed 
copper  on  their  prohibition  list,  and  whose  prohibitions  of 
export  are  found  to  be  effective. 

"Whilst  His  Majesty's  Government  cannot  abandon  in  any 
way  their  right  to  search  vessels,  they  will  be  quite  willing  to 
allow  to  proceed  to  its  destination  all  copper  which  is  to  be 
sold  only  to  named  consumers,  and  not  to  merchants,  dealers 
or  forwarding  agents,  in  such  neutral  countries  as  have  placed 
copper  and  articles  manufactured  mainly  of  copper  on  their 
list  of  prohibited  exports,  provided  that  a  copy  of  the  contract 
of  sale  is  sent  to  the  director  of  the  Trade  Division  at  the 
Admiralty,  and  it  shall  contain  a  clause  to  the  effect  that 
neither  the  copper  itself  nor  any  of  its  products  shall  be 
exported.  Such  copper  upon  arriving  at  its  destination  shall 
be  put  into  warehouse,  so  that  it  cannot  afterwards  be  declared 
in  transit.  The  bill  of  lading  must  show  clearly  the  name  of 
the  actual  consumer,  or  of  a  recognized  London  merchant,  or 
the  name  of  a  banker  who  shall  be  approved  by  His  Majesty's 
Government. 

"It  is  agreed  that  the  undersigned  wiU  not  export  copper 
to  Sweden,  Norway,  Denmark  or  Italy,  except  in  compliance 
with,  and  subject  to,  the  conditions  of  Article  3  hereof,  and 
that  it  (the  undersigned  company)  will  not  export  copper  to 
other  neutral  countries  except  subject  to  permit  of  British 
Admiralty. 

"Shipments  of  copper  to  Great  Britain  or  her  allies  may  be 
made  without  restriction. 

"All  sale  contracts  for  neutral  countries  to  be  forwarded  to 
the  British  Admiralty,  either  through  its  London  representa- 
tives or  through  His  Britannic  Majesty's  Ck)nsul  at  the  port 
of  New  York. 

"Shipments  of  copper  against  contracts  entered  into  previous 
to  the  signing  of  this  agreement  and  any  existing  f.  o.  b.  con- 
tracts are  exempt  from  its  provisions. 

"We  will  be  prepared  to  conform  to  the  different  provisions 


APPENDIX  325 

set  forth  in  the  above  regulations  of  the  Admiralty  as  regards 
shipments  of  copper  from  the  U.  S.  A.  to  neutral  countries, 
and  we  assent  to  the  terms  of  the  letter  of  January  3,  1915, 
from  Richard  Webb,  Director  of  Trade  Division,  to  Messrs. 
C.  S.  Henry  &  Company,  Ltd.,  a  copy  of  which  letter,  marked 
Exhibit  'A',  is  attached  hereto." 

Blank  Company   


Statement  Issued  by  British  Embassy  at  Washing- 
ton, May  3,  1915,  telling  American  Shippers 
HOW  TO  Export  to  European  Neutral  Coun- 
tries 

"The  British  Embassy  have  received  since  the  issue  of  the 
Order  in  Council  of  March  11  numerous  applications  from 
shippers  of  American  produce  for  information  and  advice  on 
general  lines  as  to  the  steps  which  ought  to  be  taken  by  them 
to  facilitate  the  quicker  expedition  and  passage  of  consign- 
ments of  goods  to  neutral  designations  for  neutral  consumption. 

"The  British  Embassy  can  give  no  assurance  as  to  the  im- 
munity from  visit  and  search  or  detention  of  any  particular 
shipments,  but  with  regard  to  consignments  of  non-contraband 
articles  as  well  as  of  articles  of  conditional  contraband,  they 
are  authorized  to  state  that  in  cases  where  adequate  information 
is  furnished  by  consignors  to  show  that  the  goods  shipped  are 
neutral  property  and  are  to  be  used  exclusively  for  consumption 
in  neutral  countries  or  by  the  Allies,  this  will  be  taken  into 
consideration  by  the  authorities  charged  with  the  execution 
of  the  Order  in  Council.  This  will  also  apply  to  shipments  of 
certain  descriptions  of  goods  listed  as  absolute  contraband. 
Such  goods  are,  however,  usually  subjected  to  closer  scrutiny 
and  control,  and  in  some  cases  to  special  arrangements. 

"It  would  greatly  facilitate  and  expedite  the  work  of  clearing 
vessels  bound  to  neutral  ports,  which  call  at  or  are  brought 
into  British  ports  for  examination  of  their  papers,  if  shipping 
houses  or  their  agents  would  give  British  consular  ofl&cers  a 
duplicate  of  the  final  manifest  of  the  vessel  immediately  on 
its  departure  for  Europe  in  order  that,  if  possible,  it  may  be 
transmitted  to  the  British  authorities  in  London  in  time  for  it 
to  be  received  and  considered  before  the  vessel  arrives. 

"To  further  accelerate  proceedings,  manifests  and  bills  of 
lading  should  disclose  the  exact  nature  of  the  goods  and 
wherever  it  is  possible  the  name  and  full  business  address  of 
the  ultimate  consignee  as  well  as  the  name  and  address  of  the 
consignor. 


326  ECONOMIC  ASPECTS  OF  THE  WAR 

"Shippers  would  avoid  the  use  of  generic  descriptions  such  as 
hardware,  dry  salteries,  machinery,  &c.,  which  are  capable  of 
being  employed  to  conceal  the  real  identity  of  goods  classed 
as  contraband.  An  exact  definition  of  the  specific  character 
of  consignments  will  save  delay  in  their  examination.  It  will 
also  facilitate  their  identification  with  the  articles  comprised 
in  the  export  embargo — lists  of  the  country  to  which  the 
goods  are  consigned.  For  example,  in  the  case  of  lubricating 
oils,  it  should  always  be  stated  whether  the  oil  is  vegetable  or 
mineral.  The  precise  nature  of  animal  and  vegetable  fats  and 
oils  should  also  be  indicated.  The  term  'lard,'  alone,  for  in- 
stance, is  not  adequate  without  some  closer  definition,  because 
the  lists  of  prohibited  exports  of  certain  neutral  countries 
differentiate  between  various  preparations  and  compounds  of 
this  article. 

"It  should  be  clearly  understood  that  the  forwarding  of 
goods  to  a  neutral  port  is  not  proof  that  they  are  destined 
for  neutral  consumption.  Consignors  should  always  endeavor 
to  procure  and  exhibit  complete  information  as  to  the  final 
destination  of  the  goods.  Shipments  manifested  'to  order'  or 
'in  transit,'  or  with  bills  of  lading  addressed  to  a  branch  or 
agency  of  the  consignors,  or  to  'commission  agents,'  'banks'  or 
'forwarding  houses'  for  account  of  an  unnamed  consignee, 
afford  no  evidence  as  to  their  ultimate  destination.  Wherever 
it  is  practicable,  the  full  name  and  address  of  the  ultimate 
consignee  should  figure  in  the  documents  relative  to  the  goods 
concerned,  and  metals  should,  so  far  as  possible,  be  addressed 
to  the  actual  consumers  and  not  to  dealers. 

"In  connection  with  the  establishment  of  proof  of  ultimate 
destination,  it  may  be  observed  that  if  goods  definitely  ad- 
dressed to  a  neutral  consignee  can  be  clearly  identified  as  being 
comprised  in  the  export  embargo  list  of  the  country  to  which 
they  are  consigned,  this  will  be  taken  into  consideration  as 
corroborative  evidence  of  their  destinations  for  neutral  con- 
sumption. Precision  in  describing  goods  will  accordingly  accel- 
erate comparison  with  the  lists  of  prohibited  exports  of  neutral 
countries,  and  in  the  case  of  shipments  to  Sweden  it  would 
further  hasten  proceedings  if  the  corresponding  number  of 
articles  in  the  British  tariff  were  always  given  in  addition  to 
the  description  of  the  goods.  Certificates  of  final  destination 
issued  by  the  official  representatives  of  the  country  concerned 
will  be  accepted  as  collateral  evidence  that  the  goods  are  for 
neutral  use. 

"In  all  arrangements  which  may  be  made  for  shipments  of 
goods  under  the  supervision  of  British  Consular  authorities, 
it  should  be  clearly  understood  that  the  right  of  visit  and  search 
or  detention  is  not  waived,  but  that  the  operations  of  verifica- 
tion which  may  be  called  for  by  the  proximity  of  the  countries 
of  destination  to  Germany  is  simplified  and  expedited  if  con- 


APPENDIX  327 

sular  supervision  has  taken  place  and  if  full  details  are  fur- 

"With  regard  to  shipments  to  the  Netherlands,  wheat  and 
wheat  flour  and  meal  destined  for  consumption  in  that  country 
should  be  consigned  to  the  Netherlands  government,  and  all 
other  articles  on  the  British  contraband  lists,  as  well  as  cocoa, 
coffee  and  tobacco,  destined  for  consumption  in  that  country, 
should  be  consigned  to  the  Netherlands  Overseas  Trust. 

"Information  as  to  the  description  of  goods  included  in  the 
British  lists  of  absolute  and  conditional  contraband  will  be 
furnished  on  application  to  any  British  Consul. 

"The  foregoing  recommendations  are  offered  for  the  assist- 
ance of  shippers,  and  compUance  with  them  will  materially 
hasten  the  expedition  and  passage  of  cargoes  in  cases  where 
there  is  no  further  information  at  the  disposal  of  the  authori- 
ties of  a  nature  to  throw  doubt  on  the  neutral  character  of  the 
goods  or  their  neutral  destination," 


Circular  Letter  sent  to  American  Importers  in 
April  by  Foreign  Trade  Advisers  of  the  State 
Department^,  Explaining  that  the  Foreign 
Trade  Advisers  will  present  to  the  British 
Ambassador  requests  from  United  States 
Importers  to  let  their  Goods  pass  the  British 
Blockade,  on  the  ground  that,  the  Goods 
were  bought  and  paid  for  before  March  1 

The  following  note  has  been  received  from  the  British 
Embassy  at  this  capital  relative  to  the  movement  of  American- 
owned  goods  now  in  Germany  to  this   country: 

"The  British  Embassy  are  authorized  to  state  that  in  cases 
where  a  merchant  vessel  sails  from  a  port  other  than  a  German 
port  carrying  goods  of  enemy  origin  for  which  American 
importers  claim  to  have  made  payment  prior  to  March  1,  1915, 
proofs  that  such  goods  were  paid  for  before  March  1  may 
be.  submitted  for  examination  to  the  Embassy.  If  such  proofs 
are  presented  at  a  sufficiently  early  stage  to  enable  the  report 
thereon  to  be  communicated  in  time  to  the  British  authorities, 
the  results  of  the  investigation  will  be  taken  into  account  and 
due  weight  attached  to  them  in  deciding  whether  the  goods 
concerned  should  be  discharged  under  the  provisions  of 
Article  IV  of  the  Order  in  Council  of  March  11." 

On  March  30,  1915,  the  government  of  the  United  States 
replied   to   the  British   Orders   in   Council   assuming   that   the 


328   ECONOMIC  ASPECTS  OF  THE  WAR 

British  government  will  not  deny  the  rule  that  innocent  ship- 
ments may  be  freely  transported  to  and  from  the  United 
States  through  neutral  countries  to  belligerent  territory  with- 
out being  subject  to  the  penalties  of  contraband  traflBc  or 
breach  of  blockade,  much  less  to  detention,  requisition  or  con- 
fiscation, and  that  this  would  of  course  include  all  outward- 
bound  traffic  from  tlie  neutral  country  and  all  inward-bound 
traffic  to  the  neutral  country  except  contraband  in  transit  to 
the  enemy. 

While  the  government  of  the  United  States  cannot  in  any 
way  lend  its  aid  in  an  official  and  formal  manner  to  procuring 
American-owned  goods  now  in  Germany  for  the  importers  of 
the  United  States  which  would  in  the  slightest  degree  amount 
to  a  recognition  of  the  position  of  Great  Britain  in  respect 
to  non-contraband  goods,  especially  from  neutral  ports,  the 
Office  of  the  Foreign  Trade  Advisers  of  the  Department  will 
aid  informally  American  importers  who  desire  to  present  proof 
of  ownership  of  American  goods  in  Germany  for  which  Ameri- 
can importers  claim  to  have  made  payment  prior  to  March  1, 
1915. 

You  are  therefore  advised  that  if  you  desire  to  submit  proofs 
of  your  ownership  of  goods,  paid  for  before  March  1,  for 
examination  by  the  British  Embassy,  you  may  forward  such 
evidence  as  you  have  to  the  Foreign  Trade  Advisers  of  the 
Department  of  State.  In  doing  so,  it  is  suggested  that  you 
incorporate  with  the  evidence  of  ownership  and  payment 
information  in  the  following  order: 

1.  A  history  of  the  case,  showing  dates  of  payment,  nature 
of  the  goods  bought,  location  of  goods  at  the  present,  date 
when  they  reached  their  present  location,  name  of  steamer  on 
which  it  is  desired  to  ship  such  goods,  date  of  sailing  of  such 
steamer  and  all  further  information  pertaining  to  origin,  pay- 
ment, and  shipment  of  goods  in  your  possession. 

2.  Original  bank  drafts  or  evidence  of  transfer  of  money 
from  this  country  to  belligerent  country,  verified  by  bank 
officials  if  possible. 

3.  (Paragraph  cancelled.) 

4.  Invoices  of  goods  and  such  other  evidence  as  will  prove 
the  identity  of  the  goods  with  those  actually  paid  for. 

5.  Such  other  and  further  information  in  regard  to  the 
shipment  of  goods  and  payment  therefor  as  will  be  pertinent 
and  corroborative. 

This  evidence  will  be  collated  and  presented  to  the  British 
Embassy  for  communication  to  the  British  authorities.  In 
presenting  this  evidence  the  Foreign  Trade  Advisers  will  act 
unofficially  as  your  representatives  and  with  the  understanding 
that  in  so  doing  the  Department  does  not  recognize  the  posi- 
tion of  the  British  government  under  Article  IV  of  the  Order 
in  Council  of  March  11  or  any  other  article  contained  in  the 


APPENDIX  329 

Orders  in  Council,  but  the  unofficial  aid  of  the  Foreign  Trade 
Advisers  is  given  merely  to  facilitate  the  shipments  of 
American-owned  goods  of  belligerent  origin. 

Very  truly  yours, 

Robert  F.  Rose, 
William  B.  Fleming, 

Foreign  Trade  Advisers. 


INDEX 


Absolute  contraband. 
See:  Contraband, 

Agricultural  production  of 
Germany,  growth  of, 
271. 

American  Machinist,  adver- 
tisement regarding  ex- 
plosives, 303. 

Ammunition,  England's  con- 
trol   of    copper    means 
control  of,  194. 
See    also:    Munitions    and 
Explosives. 

Artillery. 

See:  Explosives. 

Asquith,   Premier,  foreshad- 
ows blockade,  150. 
answers     inquiries     as    to 
British   coal   exports   to 
Holland,  etc.,  197. 

Automobiles,  commercial  in- 
crease in  exports  of,  215. 

Balance  of  trade  during  war 

months,  210. 
Balfour,  on   the   legality   of 

the      British      blockade, 

108. 
Baltic    ports    of    Germany, 

our    rights    to    ship    to, 

177. 
See  also:  Blockade. 
Belgium,  food  purchases  for, 

33. 
Belligerent  rights  defined,  6. 
Belligerents,   right   to   trade 

with,  according  to  State 

Department,  37. 
Benzol,  substitute  for  gaso- 
line, 287. 


Beresford,  Lord,  questions 
Asquith  regarding  pros- 
pective blockade,  151. 

Bermuda     cases,     cited     by 
England,  177. 
cited   in    British   July   23 
note,  89. 

Bernstorff,    Count,    guaran- 
tees imported  food  will 
not  reach  military,  62. 
complains    of    exports    of 

hydro-aeroplanes,  296. 
memorandum    of,    in    De-^ 

cember,  295. 
memorandum       regarding 
ammunition  exports,  299, 
300. 

Bethlehem  Steel  Co.,  pro- 
posed exports  of  sub- 
marines to  England,  295. 

Bismarck,     establishes     pro- 
tective   tariff   for   food- 
stuffs, 270. 
establishes  protective  tariff 

for  industries,  268. 
on  right  to  intercept  food- 
stuffs, 82. 

Blockade,  does  not  affect  all 
neutrals,  88,  106,  108, 
177. 
effect  of,  in  creating  un- 
desirable precedent,  105. 
of  Germany,  announced 
by  England,  14,  83. 

Boer  War,  Salisbury's  posi- 
tion on  foodstuffs  dur- 
ing, 41. 

Bread,  German  measures  re- 
stricting consumption 
of,  275. 


332 


INDEX 


Breadstuff s,  increase  in  ex- 
ports of,  212. 

Bremen,  high  cotton  prices 
at,   129. 

Bryan,  Secretary,  answers 
Senator  Stone's  com- 
plaint,  297. 

Bryan,  Secretary,  obtains 
from  European  neutrals 
export  embargoes  on 
copper,  189. 

Cable  censorship,  British 
abuse  of,  222. 

Caprivi,  on  right  to  intercept 
foodstuffs,  82. 

Certification  of  U.   S.  ship- 
ments   to    neutrals,    by 
British  consuls,   101. 
See  also:  Consuls,  British. 

China  War  of  1885  with 
France,  rice  contraband, 
39. 

Churchill,  Winston,  praises 
"economic  pressure"  on 
Germany,  143. 

Cleveland  Automatic  Ma- 
chine Co.,  advertisement 
regarding  explosives, 
303. 

Clothing,  war,  increase  in 
exports  of,  215. 

Coal,  British,  exports  to 
Holland  and  Scandi- 
navia, 196. 

Colquitt,  Gov,,  complains  of 
England,  144. 

Compulsion,  need  of,  to  en- 
force law,  3. 

Conditional  contraband. 
See:  Contraband. 

Confiscation  Decree,  of  Ger- 
many, affecting  grain 
and  flour,  61,  274. 

Consuls,  British,  certify  U. 
S.  shipments  to  neutrals, 
101. 

"Continuous  voyage,"  dis- 
cussion of  principle  of, 
177. 


Contraband,  absolute,  jus- 
tice of  considering  cop- 
per as,  181. 

absolute,  justification  of 
considering  petroleum 
as,  286. 

absolute,  justification  of 
considering  rubber  as, 
232. 

as  defined  in  Declaration 
of  London,  21. 

attitude  of  Britain  to- 
wards, as  a  neutral,  183. 

conditional,  right  to  move 
to  Germany  indirectly, 
24,  180. 

conditional,  abolished  by 
October  Order  in  Coun- 
cil, 47. 

conditional,  treatment  of 
under  August  Order  in 
Council,  23. 

copper  as  absolute,  182. 

copper  as  conditional,  175. 

cotton  to  be  declared,  132, 
147-149,  160,   167. 

lists,  British  and  German, 
extension  of,  13. 

lists,  fear  of  shippers  re- 
garding extension  of,  26. 

lists  of  Declaration  of 
London,  10. 
Copper  agreement,  offered 
by  Gardner  to  U.  S. 
producers  on  behalf  of 
Admiralty,  192. 

accepted    by    U.    S.    pro- 
ducers, 205. 
Copper,    as    contraband,   ef- 
fect on  American  work- 
men, 186,  208. 

Britain  will  let  neutrals 
have  normal  quantity 
of,  194. 

British  takings   of,   195. 

declared  absolute  contra- 
band, 182. 

declared  conditional  con- 
traband, 175. 


INDEX 


333 


Copper,  exports,  decrease  in, 
during  war,  217. 
export    embargoes    on,   is- 
sued by  European  neu- 
trals, 188. 
exports  to  countries  adja- 
cent to  Germany,  172,  3. 
exports  to  Holland,  Brit- 
ish measures  regarding, 
174. 
exports,  importance  to  U. 

S.,  169. 
exports    for    Sweden    de- 
tained by  England,  182. 
Italy's  need  for,  189,  194. 
prices,    before    and    after 

outbreak  of  war,  171. 
reported    concealment    of, 

in  ships'  cargoes,  198. 
shipments,  "to  order,"  197. 
stock  of,  in  Germany,  20(>. 
takings  of  England,  172. 
under  declaration  of  Lon- 
don,   172. 
Com      Exchange,      London, 
wants  to  export  to  Hol- 
land, 28. 
Cotton,    as    contraband. 

See:  Contraband  cotton. 
Cotton  crop,  importance  and 
distribution   of   exports, 
113. 
declared      non-contraband 
by  England,  137,  139. 
acquiescence    by 
PVance,  140. 
difficulty    of    shipping    to 
neutral     countries,     134, 
138,  155-159. 
exports,  decrease  in,  dur- 
ing war,  217. 
exports     to     England    by 

months,  115. 
exports    to    Germany    by 

months,   117,  145. 
farmer,  economic  depend- 
ence  of,  135. 
fear  that  it  would  be  de- 
clared  contraband,    132. 


Cotton,     financial     problems 
and  solution,  166. 
German  supply  of,  162. 
prices,  British  buyers  buy 

at  depressed,  144,  145. 
prices,    during    July,    '14, 
114. 
August-October,      '14, 

118. 
November-April,     '15, 

147. 
April-July,  '15,  161. 
importance    of,    to    South, 

112. 
valorization   of,  by   Great 
Britain,  167. 

Dacia,  case  of,  125. 
Declaration   of  London,   ac- 
cepted  by   British   with 
modifications,  23. 
accepted   by   Teutons,   re- 
jected by  Allies,  10. 
contraband  lists  of,  10,  21. 
necessity    for    its    accept- 
ance by  belligerents,  17, 
309. 
origin  of,  7. 

rights  of  conditional  con- 
traband    to     move     via 
neutral   ports,   24. 
this     right     abolished 
by  August  Order  in 
Council,  26. 
urged    on    belligerents    by 
U.  S.,  9. 
Declaration   of   Paris,   cited 
in   our    March    30   note, 
91. 
Denmark,  British  control  of 
U.    S.    exports    to,    101, 
102. 
Denver,   Mallory   Line   ship, 
founders    in    mid-ocean, 
124. 
Detentions  by  England,  list 
of,  53. 


334 


INDEX 


Dutch  Government,  handles 
exports  for  Holland,  x?9. 
Dyes,  American  exports  of, 
to    England,   346. 

British  permission  for 
limited   imports  of,  250. 

ceasing  of  shipments  of, 
249. 

coal-tar,  process  of  mak- 
ing, 244. 

German  restriction  of  our 
supplies  of,  247. 

our  dependence  on  Ger- 
many for,  244,  245,  250. 
DyestuflFs,  sent  in  return  for 
cotton,  137. 

Economic  power  of  Eng- 
land, 221. 

"Economic  pressure,"  fal- 
lacy of,  290. 

Economic  war,  nature  of,  4. 

Egyptian    cotton    preferred 
by  England,  133. 
moves  to  Germany,  163. 

Embargoes     on     exports     to 
Germany,       forced      on 
neutrals,  51. 
re-export,  forced  on  Euro- 
pean neutrals,  28. 

Embargo  on  exportation  of 
cotton  by  Denmark,  140. 
on  re-exportation  of  cop- 
per, by  European  neu- 
trals, 188. 
on  re-exportation  of  cot- 
ton by  Holland,  131. 

Emigration,  German,  growth 
and  decline  of,  268. 

English  Channel,  neutral 
ships  intercepted  when 
passing,   16. 

Explosives,    importance    of, 
in  this  war,  291. 
U.  S.  contracts  for,  292. 

Exports   of   ammunition. 
See:  Munitions  exports. 

Exports  of  U.  S.,  by  months, 
glO. 


Exports  of  U.  S.,  by  main 

groups,  212,  217. 
distorted      by      European 

War,  211,  217,  218. 
Export        trade,        German, 

growth  of,  269. 

Farmer,  prosperity  of,  33. 
Federal  revenues. 

See:  Revenues,  Federal. 
Fertilizer,  German   shortage 
of,  and  substitutes,  284. 
Flags,  neutral,  misuse  of  by 

belligerents,  77. 

Flour,    exports    of,    August 

1-May  31,  34. 

prices  of,  during  war,  34. 

Fodder,     German     measures 

to  meet  lack  of,  277,  279. 

Food,    increase    in    exports 

of,  212. 
Forage,   increase  in  exports 

of,  214. 
Foodstuffs,  right  to  move  to 
Germany    via    neutrals, 
24. 
rights    of,   under    interna- 
tional law,  19,  37,  39,  43. 
British   admission    re- 
garding, 57. 
Later  British  position, 
82. 
rights   of,  under  Declara- 
tion of  London,  21. 
Foreign  Office,  British,  press 
statement   on   meat   de- 
tention, 95. 
Foreign  Trade  Advisers,  fa- 
cilitate     movement      of 
goods    through.    British 
blockade,   255. 
France  declares  rice  contra- 
band in  war  with  China, 
1885,  39. 
Free  list  of  Declaration  of 
London,   10. 

Gans  S.  S.  Co.,  steamers  of, 
held  up  by  England,  49. 


INDEX 


335 


Gardner,  offers  American 
copper  producers  agree- 
ment with  Admiralty, 
193. 

Genet,  E.  C,  Thomas  Jef- 
ferson's letter  to,  223. 

Gerard,  Ambassador,  esti- 
mates of,  regarding 
German  cotton  con- 
sumption, 164. 

German   Ambassador. 
See:   Bernstorff. 

German  Confiscation  Decree, 
affecting  grain  and  flour, 
61. 
modification,  63. 

Grain,    difficulty   in    export- 
ing, in  eariy  months  of 
war,  31. 
vessels  diverted  to  British 
ports  early  in  war,  20. 

Granville,  Lord,  protests 
when  France  declares 
rice   contraband,   39. 

Greenbriar,  first  American 
ship  to  reach  Bremen, 
123. 

Grey,  Sir  Edward,  instructs 
British  delegation  to 
vote  against  contraband 
lists,  183. 
speaks  of  mild  October 
Order  in  Council,  44. 

Hague  Conventions,  not  all 
ratified,  8. 

Hamburg,  fortifications  of, 
according  to  British,  69. 

Hartlepool,  bombardment 
of,   69. 

Hay,  John,  instructions  to 
U.  S.  Ambassador  at 
St.  Petersburg  regard- 
ing rights  of  neutrals, 
42. 

Holland-American  Line  ap- 
pointed by  England  to 
carry  U.  S.  imports 
from   Germany,  256. 


Holland-American  Line  ac- 
cepts shipments  only 
for  Netherlands  Oversea 
Trust,  29. 

stoppage   of   steamers   of, 
by  British,  175. 
Holland,     British     measures 
regarding     copper     ex- 
ports to,  174. 

foodstuffs  prevented  from 
reaching,  in  August, 
1914,  28. 

U.  S.  exports  to,  cited  in 
British  note  of  January 
7,  55. 

cited  in  British  May  21 
statement,  96. 

Imports  from  Germany,  ef- 
fect of  March  Order  in 
Council  upon,  252. 

Imports,   German,   effect   of 
stoppage  upon  our  Fed- 
eral revenues,  261. 
of  U.  S.  by  months,  210. 

"Industrial  nations,"  com- 
parison of  England  and 
Germany  as,  266. 

Insurance,    hull    and    cargo, 
interferes     with     cotton 
exports,  121. 
Marine,     affecting    cotton 

movement,    121,   122. 
War  Risk. 
See:  War  Risk  Insurance. 

Italian  Ambassador  certifies 
copper  shipments  for 
Italy,  202. 

Italy's  need  for  much  cop- 
per, 189,  194,  203. 

Japan,  hypothetical  war 
with,  105. 

Jefferson,   Thomas,   on   need 
of    trading     with     both 
belligerents,   19,   107. 
letter  to  E.  C.  Genet,  223. 

Johnson,  Cone,  issues  state- 
ment on  cotton,  133. 


336 


INDEX 


Kina,  S.  S.,  allowed  to  sail 
after  March  31,  154. 

Krupp,  invents  substitute 
for  copper,  208. 

Lansdowne,  Lord,  on  the 
illegality  of  stopping 
foodstuffs  shipments, 
110. 
position  on  declaring  cot- 
ton contraband,  149. 
protest  against  Russian 
seizure  of  cargo  of  food- 
stuffs in  1904,  41. 

Law,  international,  nature 
of,  1. 

Leather  goods,  increase  in 
exports  of,  215. 

Liverpool  Cotton  Exchange 
forces  American  mem- 
bers to  sign  agreement, 
160. 

Lusitania  horror,  15. 

London,  Declaration  of. 
See:  Declaration  of  Lon- 
don. 

Matamoros    cases,   178. 

Matanzas,  American  steam- 
er, sails  to  get  German 
dyes,  248. 

Maxim,  Hudson,  says  cot- 
ton not  necessary  for 
explosives,  163. 

Maximum  prices  established 
by  German  Government, 
273. 

Meat  products,  increase  in 
exports  of,  213. 

Meat  steamers  detained,  49, 
50,  94. 

Mines,  discontinuance  of 
their  use  at  sea  sug- 
gested, 80,  81. 

Mines   in   North   Sea,   effect 
of,  8. 
North  Sea  declared  a  mine 
area    by    England,    No- 
vember 2,  142. 
vessels  lost  through,  142. 


Mississippi  Supreme  Court, 
session  of,  in  overalls, 
136. 
Modifications  of  Declaration 
of  London  by  August 
Order  in  Council,  23. 
Morality    and    international 

law,  3. 
Motorcycles,  difficulty  of  ex- 
porting to  neutrals,  231. 
Munitions,     dependence     of 
Allies  on  U.  S.  for,  210. 
exports,  ethics  of,  302. 
extent    of,    to    Allies, 

307. 
German    practice    re- 
garding, 297,  301. 
legality  of,  301,  304. 
proposed     prohibition 
of,      294,      297-300, 
306. 
our  advantage  in,  305. 
increase  in  exports  of,  212. 
material    for    making,    in- 
crease in  exports  of,  216. 

"National  Safety"  as  an  ex- 
cuse of  belligerents,  55, 
79,  91. 

Neches,  seizure  of,  protested 
by  U.  S.,  260. 

Answer    bv    England, 
261. 

Netherlands   Oversea  Trust, 
certifies    U.    S.    imports 
from  Germany,  258. 
formation  of,  29. 

Neutral  European  ports,  im- 
possibility of  trading 
with  Germany  via,  12, 
254. 

Neutral  ports,  right  to  ship 
to  Germany  via,  178, 
180. 

Neutral  rights  defined,  6,  7. 

Neutral  steamship  lines,  re- 
fuse to  carry  U.  S.  im- 
ports from  Germany, 
252. 


INDEX 


337 


Neutrality,    American,    vio- 
lated    by     ceasing     to 
trade  with  Germany,  16, 
19,  39,  88,  168,  259,  290. 
North    Sea    mining    unpro- 
tested, 8,  9. 
Note,  American,  on  October 
22  to  England,  200. 
American,    protesting 
against    Britain's    inter- 
ference  with   commerce, 
December  26,  53. 
American,  to  Germany  on 
February  15,  protesting 
War  Zone,  77. 
American,  to  England  on 
February  15,  protesting 
stoppage  of  Wilhelmina, 
67. 
American,     to     Germany 
and    England    on    Feb- 
ruary 20,  80. 
American,  to  England  on 
March  5,  inquiring  about 
blockade,  84. 
American,  to  England  on 
March      30,      protesting 
against  blockade,  87. 
American,      to      England, 
July       14,       protesting 
against   prize   court   de- 
lays, 99. 
American,  to  England  on 
July       15,       protesting 
seizure  of  S.  S.  Neches, 
260. 
Austrian,  to  U.   S.,  July, 
1915,  protesting   ammu- 
nition exports,  300. 
British,    January    7,    an- 
swering   our    December 
26  protest,  54. 

especial    reference    to 
copper,  201. 
British,  February  10,  an- 
swering ours  of  Decem- 
ber 26,  76. 


Note,  British,  February  10, 
answering  our  December 
26  protest,  54. 
British,  February  19,  an- 
swering our  Wilhelmina 
protest,  68. 
British,      answering      our 
joint    note    to    England 
and    Germany    of    Feb- 
ruary 20,  81. 
British,    to   U.    S.    A.    on 
March       15,       enclosing 
blockade  Order,  85. 
British,  to  U.  S.  A.,  July 
23,  answering  March  30 
note,  89. 
British,   to    U.    S.    A.,   of 
July  31,   answering   our 
protest  of  July  14,  100. 
British,   to   U.    S.    A.,   on 
July  31,  answer  to  our 
Neches  note,  261. 
German,  October  10,  pro- 
testing   against    British 
procedure   at   sea,  38. 
American   answer,  39. 
German,  to  U.  S.  A.,  Feb- 
ruary      16,      answering 
War  Zone  protest,  78. 
Reference    therein    to 
ammunition  exports, 
298. 
German,     answering     our 
joint    note    to    England 
and    Germany    of    Feb- 
ruary 20,  80. 

Oil,  German  substitutes  for, 

287. 

Oil,  German  supply  of,  286. 

Order  in  Council  of  August 

20  and  its  result,  10,  11. 

of  October  29,  terms  and 

effect  of,  13,  44. 
of  March  11,  terms  of,  85, 

253. 
of  March  11,  modification 
of,  152,  158,  254. 


338 


INDEX 


Order  in  Council  of  March 
11,  effect   upon   imports 
from  Germany,  252. 
of  March  23,  eflFect  of,  72. 
of  March  23,  operation  of, 
with    regard    to    cotton, 
155. 
Organization,  German  indus- 
trial,    effectiveness     of, 
288. 
Oversea  Trust,  Netherlands. 
See:  Netherlands  Oversea 
Trust. 

Packers,  statement  of,  re- 
garding British  deten- 
tion of  provisions,  97, 
99. 

Page,  Ambassador,  cables 
on  February  2,  that 
grain  and  flour  for  Ger- 
many are  contraband, 
64. 

Paris,  Declaration  of,  7. 

Patterson,  A.  M.,  U.  S. 
agent  of  British  Gov- 
ernment in  wool  trade, 
237. 

Peace  movement,  enlighten- 
ing effect  of,  2. 

Petroleum  declared  absolute 
contraband,  286. 
See  also:  Oil. 

Phosphate,  German  substi- 
tute for,  285. 

Piracy,  early  practices  of, 
1. 

Population,   British,   growth 
and  support  of,  267. 
German,  growth  and  sup- 
port of,  265. 

Potash,    American    imports 
of,  239. 
effect  of  shortage  of,  243. 
embargo  on,  by  Germany, 

241. 
proposed    shipment    of    3 
cargoes  of,  241. 


Potash  Syndicate,  contracts 
with,  240. 

Prices   of   wheat   and    flour, 
investigation   of,   35. 
maximum,    established    by 
German        Government, 
273. 

Prisoners,  Russian,  aiding 
German  harvest,  281. 

Prize  courts,  British,  power 

of,  13. 

British,  delay  in  disposing 

of  detained  copper,  190. 

British,      proceedings      in 

meat  cases,  50,  94,  99. 
Russian,    Lord    Lans- 
downe  refuses  to  accept 
judgment    of    condemn- 
ing  foodstuffs,  42. 

Proof,  burden  of,  placed 
upon  captured,  by  Oc- 
tober Order  in  Coun- 
cil, 46. 

Public  opinion,  force  of,  2. 

Ramsay,  Sir  William,  on 
cotton  as  contraband, 
147. 

Re-export    embargoes. 
See:  Embargoes,  re-export. 

Retaliation  by  belligerents, 
discussion  of,  71. 

Retaliation  measures,  dis- 
cussion of,  26. 

Revenues,  Federal,  affected 
by  decreasing  German 
imports,   15,  258,  261. 

Rights  of  belligerents. 
See  :Belligerent    rights. 

Rights   of  neutrals. 
See:  Neutral  rights. 

Rockefeller  Commission, 

purchases  of,  33. 

Roumania,  wheat  exports  to 
Germany,    282. 

Russia's  seizure  of  food 
cargo  protested  by  Lord 
Lansdowne  in  1904,  41. 


INDEX 


339 


Russia,     wheat    exports     to 

Germany,  283. 
Rubber,   Brazilian,  difficulty 
of  importing,  230. 

conditions  under  which  it 
may  be  imported,  228. 

declared  absolute  contra- 
band, December  23,  232. 

declared  conditional  con- 
traband on  September 
21,  226. 

embargo  on,  lifted  by 
England,  228. 

export  embargo  on,  in 
British   empire,  226. 

German  stock  of,  234. 

reference  to,  in  British 
January  7  note,  228. 

trade  with  neutrals  im- 
paired by  British  meas- 
ures, 231. 
Rubber  Club,  requests  cus- 
tomers not  to  export  to 
Germany,  229. 
Rubber  Club,  statement  of, 
regarding  situation  in 
rubber  trade,  226. 

Salisbury,  Lord,  position  re- 
garding shipment  of 
foodstuffs  during  Boer 
War,  41,  54. 

Saltpeter,  German  substitute 
for,  284. 

Scandinavia,  exports  to, 
cited  in  British  note  of 
January  7,  55. 
large  U.  S.  trade  with, 
cited  in  British  state- 
ment of  May  21,  96. 

Schwab,  C.   M. 

See:    Bethlehem    Steel. 

Scott,  Sir  William,  quoted 
with  regard  to  leisurely 
prize  court  proceedings, 
190. 

Sering,  Prof.,  letter  to,  276. 

Shells. 

See:  Explosives. 


Shipping,    American,   inade- 
quate for  foreign  trade, 
29,   123. 
German,     proposed     pur- 
chase of,  125,  128. 
Ship  Purchase  BiU,  128. 
Smith,    Hoke,    has    commit- 
tee appointed  in  Senate 
to    further    cotton    ex- 
ports, 136. 
Smuggling  trade  with   Ger- 
many, 281. 
South     America,     proposed 
government  line  to,  130. 
purchasing       power       of, 
crippled,   211. 
Sovereignty,  American, 

threatened    by     activity 
of  British  officials,  223. 
Spring-Rice,  announces 

blockade    on    March    1, 
84. 
Steamship  lines,  pressure  on, 

by  Great  Britain,  27. 
Steamers,      with      packing- 
house products,  held  up 
by  British,  49. 
Stone,  Senator,  complains  of 
munitions      exports      to 
Allies,  297. 
Stowell,      Lord,      cited      on 
prize    court    procedure, 
100. 
Submarines. 

See:  War  Zone. 
Sugar,    increase    in    exports 

of,  214. 
Sweden,     copper     for,     de- 
tained by  England,  182. 
Swine,  reduction  in  number 
of  German,  277. 

Textile  Alliance,  U.  S.  agent 
of  England  in  wool 
trade,  236. 

Textile  Alliance,  obtains 
from.  ]plngl;and  paps'  tor 
tvvo,  caj-goes,  <>'f  ijyes,1?'*l. 


340 


INDEX 


Textile  manufacturers,  in- 
crease in  exports  of, 
215. 

"To  order"  copper  ship- 
ments forbidden  by 
Italian  and  Scandina- 
vian steamsliip  lines,  199. 

"To  order"  shipments,  meth- 
od of,  48,  197. 

"To  order"  shipments  to 
neutrals  prevented,  Oc- 
tober 29,  13,  197. 

Trade  Advisers,  Foreign. 
See:    Foreign    Trade    Ad- 
visers. 

"Trading  with  enemy"  pre- 
vented by  belligerents, 
221. 

Walsh,  Senator,  distributes 
credit  for  starting  cot- 
ton movement,  138. 

War  Risk  Insurance  of 
various  governments, 
121,  123. 

War  Risk  Insurance,  need 
of,  114. 

War  supplies,  increase  in 
exports    of,   216. 

War  Zone,  German,  British 
retaliate  for,  150. 

War  Zone,  German,  an- 
nounced by  Germany, 
14. 

War  Zone  Decree,  German, 
origin  of,  77. 


Wheat,   exports    of,   August 
1-May  31,  34. 

exports,  to  Germany  from 
Roumania  and  Russia, 
282. 

prices,    course    of,    during 
war,  32. 
Wilhelmina,    Belgian    Com- 
mission    offers     to     buy 
cargo  of,  64. 

cargo,  British  suggest  un- 
loading, 72. 

case,  settlement  of,  74. 

origin  of  shipment,  59. 

seized  by  British,  66. 

shipment,  reception  by 
British  public,  60. 
Wilson,  President,  heads 
"Buy-a-bale"  movement, 
136. 
Wool,  American,  export  of, 
prevented  by  England, 
237. 

declared  absolute  contra- 
band, 238. 

embargo  on,  in  Great 
Britain,  235. 

embargo  lifted,  236. 

U.  S.  imports  of,  234. 
Work,  B.  G.,  goes  to  Eng- 
land re  rubber,  227. 

X-ray  used  to  search  cotton 
bales,    141. 


Printed  for  the  Yale  University  Press 
by  E.  L.  Hildreth 


COLUMBIA  UNIVERSITY 


5>40.9I 


C<53^ 


